Question

Sandra, Inc. had 200 units of inventory on hand at the end of the year. These were recorded at a cost of $16 each using the last-in, first-out (LIFO) method. The current replacement cost is $12 per unit. The selling price charged by Sandra, Inc. for each finished product is $20. In order to record the adjusting entry needed under the lower-of-cost-or-market rule, the Cost of Goods Sold will be ________.

Answer 1

Answer:

$800 debited

Explanation:

As we know that

The inventory should be reported at the cost or net realizable value whichever is lower

Since the total cost is

= 200 units × $16

= $3,200

And, the current replacement cost

= 200 units × $12 units

= $2,400

So, the inventory should be recorded at $2,400

Therefore, the cost of goods sold would be

= $3,200 - $2,400

= $800 debited