Mariah Company Has Inventory at the End of the Year

question 76

Multiple Choice

Mariah Company has inventory at the end of the year with a historical cost of $75,000.Mariah Company uses the perpetual inventory system.Under the LCM rules,the current replacement cost is $72,600.Under U.S.GAAP,the journal entry to record the write-down to LCM will:

• A)debit Cost of Goods Sold for $2,400 and credit Inventory for $2,400.
• B)debit Cost of Goods Sold for $2,400 and credit Purchases for $2,400.
• C)debit Inventory for $2,400 and credit Cost of Goods Sold for $2,400.
• D)debit Purchases for $2,400 and credit Cost of Goods Sold for $2,400.

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Definitions:

Job Order Cost

The cost calculated for a specific customer order, taking into account direct labor, direct materials, and allocated overhead.

Process Cost Systems

Accounting systems used to apply costs to similar products that are mass-produced in a continuous fashion.

Direct Labor

The wages of employees who are directly involved in the production of goods or services.

Overhead Costs

Expenses related to the general operation of a business that are not directly tied to the production of goods or services, such as utilities and administrative salaries.