Handbags, Inc. had 400 units of inventory on hand at the end of the year. These were recorded at a cost of $14 each using the last-in, first-out (LIFO) method. The current replacement cost is $10 per unit. The selling price charged by Handbags, Inc. for each finished product is $17. In order to record the adjusting entry needed under the lower-of-cost-or-market rule, the Merchandise Inventory account will be: A) debited by $4,000. B) credited by $4,000. C) credited by $1,600. D) debited by $1,600.
Handbags, Inc. had 400 units of inventory on hand at the end of the year. These were recorded at a cost of $14 each using the last-in, first-out (LIFO) method. The current replacement cost is $10 per unit. The selling price charged by Handbags, Inc. for each finished product is $17. In order to record the adjusting entry needed under the lower-of-cost-or-market rule, the Merchandise Inventory account will be: A) debited by $4,000. B) credited by $4,000. C) credited by $1,600. D) debited by $1,600.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Handbags, Inc. had 400 units of inventory on hand at the end of the year.
These were recorded at a cost of $14 each using the last-in, first-out (LIFO)
method. The current replacement cost is $10 per unit. The selling price
charged by Handbags, Inc. for each finished product is $17. In order to
record the adjusting entry needed under the lower-of-cost-or-market rule,
the Merchandise Inventory account will be:
A) debited by $4,000.
B) credited by $4,000.
C) credited by $1,600.
D) debited by $1,600.
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