Wakefield Company Uses a Perpetual Inventory System

question 16

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.
Assume that the replacement did not happen in November. In December, the company decided not to replace any of the 1,500 units. The entry required on December 31 to eliminate valuation accounts related to the inventory that will not be replaced will include:

• A) a debit to Excess of Replacement Cost over LIFO Cost of Inventory Liquidation for $22,500.
• B) a credit to Cost of Goods Sold for $15,000.
• C) a debit to Inventory for $70,000.
• D) a debit to Inventory for $15,000.

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