Assume That the Replacement Did Not Happen in November

question 54

Multiple Choice

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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Definitions:

Cost Method

An accounting method used for investments, where the investment is recorded at its acquisition cost, without recognizing the investor's share of the investee's profit or loss until dividends are received.

Voting Shares

Shares that give the shareholder the right to vote on company matters, such as electing the board of directors, at shareholder meetings.

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operational costs, indicating its profitability over a specific period.

Securitization

The process of converting assets, often illiquid, into marketable securities.