Wakefield Company Uses a Perpetual Inventory System

question 54

Multiple Choice

Wakefield Company uses a perpetual inventory system. In August, it sold 2,000 units from its LIFO-base inventory, which had originally cost $35 per unit. The replacement cost is expected to be $45 per unit. The company is planning to reduce its inventory and expects to replace only 1,500 of these units by December 31, the end of its fiscal year. The company replaced 1,500 units in November at an actual cost of $50 per unit.
Based on the preceding information, in the entry to record the replacement of the 1,500 units in November, Accounts Payable will be credited for:

• A) $67,500.
• B) $75,000.
• C) $62,500.
• D) $60,000.

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Definitions:

Pounds

A unit of weight commonly used in the British, United States customary and other systems of measurement.

Work in Process

Inventory that includes materials that have been partially processed but are not yet finished goods.

Standard Costs

Estimated or predetermined costs of manufacturing, selling, or doing something, which are used for budgetary and costing purposes.

Cost System

A method used by firms to track, record, and analyze costs associated with their operations, typically to improve efficiency or profitability.