Sandra Inc.had 200 units of inventory on hand at the end of the year.These were recorded at a cost of $12 each using the last-in,first-out (LIFO)method.The current replacement cost is $10 per unit.The selling price charged by Sandra Inc.for each finished product is $15.In order to record the adjusting entry needed under the lower-of-cost-or-market rule,the Cost of Goods Sold will be ________.

Question

Quizplus · Accepted Answer

The lower-of-cost-or-market rule requires that inventory be valued at the lower of its cost or market value. In this case, market value is $10 per unit, which is lower than the cost of $12 per unit. Therefore, the inventory value should be adjusted to $10 per unit, resulting in a total value of $2,000 (200 units x $10 per unit). To record this adjustment, the Cost of Goods Sold account should be debited by the amount of the adjustment, which is $400 (200 units x [$12 per unit - $10 per unit]). Therefore, the correct answer is C, debited by $400.