Uptown Department Store uses the perpetual inventory system and has ending inven

Question

Uptown Department Store uses the perpetual inventory system and has ending inventory with a historical cost of $620,000. The current replacement cost of the inventory is $598,000. The net realizable value is $660,000. Before any adjustments at the end of the period, the cost of goods sold account has a balance of $920,000. Which journal entry is required under U.S. GAAP? 0 A. debit Cost of Goods Sold for $22,000 and credit Inventory for S22.000. O B. debit Inventory for S22.000 and credit Cost of Goods Sold for S22.000. C. debit Inventory for $40,000 and credit Cost of Goods Sold for $40.000. OD. debit Cost of Goods Sold for $40,000 ad credit Inventory for $40,000.

Explanation / Answer

since the current repalacement cost is $598,000 and historical cost is $620,000

one need to record the inventory at lower of cost or market value which is $598,000

hence the correct option will be

option A) Debit cost of goods sodl for $22,000 and credit inventory for $22,000

since the current repalacement cost is $598,000 and historical cost is $620,000

one need to record the inventory at lower of cost or market value which is $598,000

hence the correct option will be

option A) Debit cost of goods sodl for $22,000 and credit inventory for $22,000

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