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.

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter14: Adjustments For A Merchandising Business

Section: Chapter Questions

Problem 3MC: Under the periodic inventory system, what account is debited when an estimate is made for the cost...

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