A company's current LIFO inventory consists of 5,000 units purchased at $6 per unit.Replacement cost has now fallen to $5 per unit.What is the entry the company must record to adjust inventory to market?

A) Debit Merchandise Inventory $25,000; credit Cost of Goods Sold $25,000.
B) Debit Cost of Goods Sold $30,000; credit Merchandise Inventory $30,000.
C) Debit Cost of Goods Sold $5,000; credit Merchandise Inventory $5,000.
D) Debit Loss on Inventory $5,000; credit Cost of Goods Sold $5,000.
E) Debit Merchandise Inventory $30,000; credit Cost of Goods Sold $25,000.

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Miguel Cablao · Accepted Answer

Final Answer : C, Explanation :  LIFO inventory is valued based on the last items purchased, therefore the replacement cost of $5 per unit is used to adjust the value of the current inventory. The adjustment is made by debiting Cost of Goods Sold $5,000 and crediting Merchandise Inventory $5,000.

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