A Company's Current Inventory Consists of 5,000 Units Purchased at $6

question 155

Multiple Choice

A company's current inventory consists of 5,000 units purchased at $6 per unit. Replacement cost has now fallen to $5 per unit. What is the entry the company must record to adjust inventory to market?

• A) Debit Merchandise Inventory $25,000; credit Cost of Goods Sold $25,000.
• B) Debit Loss on Inventory $5,000; credit Cost of Goods Sold $5,000.
• C) Debit Cost of Goods Sold $30,000; credit Merchandise Inventory $30,000.
• D) Debit Cost of Goods Sold $5,000; credit Merchandise Inventory $5,000.
• E) Debit Merchandise Inventory $30,000; credit Cost of Goods Sold $25,000.

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Definitions:

Buyers

Individuals or entities that purchase goods or services for personal use, resale, or production purposes.

Unit

A standard measure or quantity used in expressing the size, amount, or extent of something, often used in economics for analysis.

Equilibrium Price

The market price at which the quantity of goods supplied is equal to the quantity of goods demanded.