At December 31,the Wendy Company Has Ending Inventory with a Historical

question 10

Multiple Choice

At December 31,the Wendy Company has ending inventory with a historical cost of $630,000.Assume the company uses the perpetual inventory system.The current replacement cost of the inventory is $608,000.The net realizable value is $650,000.The normal profit on this inventory is $50,000.Before any adjustments at the end of the period,the cost of goods sold account has a balance of $900,000.Following U.S.GAAP,which journal entry is required on December 31 to adjust the ending balance of inventory if the indirect method is used?

• A)Debit Cost of Goods Sold for $22,000 and credit Inventory for $22,000.
• B)Debit Inventory for $22,000 and credit Cost of Goods Sold for $22,000.
• C)Debit Loss on Inventory Writedown for $22,000 and credit Inventory for $22,000.
• D)Debit Loss on Inventory Writedown for $22,000 and credit Allowance to Reduce Inventory to Market for $22,000.