Mariah Company Has Inventory at the End of the Year

question 154

Multiple Choice

Mariah Company has inventory at the end of the year with a historical cost of $95,000. Mariah Company uses the perpetual inventory system. Under the LCM rule, the current replacement cost is $75,600. Under U.S. GAAP, the journal entry to record the write-down to LCM will:

• A)debit Cost of Goods Sold for $19,400 and credit Inventory for $19,400.
• B)debit Cost of Goods Sold for $19,400 and credit Purchases for $19,400.
• C)debit Inventory for $19,400 and credit Cost of Goods Sold for $19,400.
• D)debit Purchases for $19,400 and credit Cost of Goods Sold for $19,400.

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Definitions:

Interest Cost

The cost incurred by an entity for borrowing funds, typically reflected as an expense in the income statement.

Pension Expense

The annual cost recognized by an employer for maintaining a retirement plan for its employees.

Actuarial Assumptions

Estimates used to calculate the present and future financial obligations of pension plans and insurance policies, often involving life expectancy and interest rates.

Present Values

The current value of a future amount of money or stream of cash flows, discounted at a particular rate of interest.