Mariah Company Has Inventory at the End of the Year

question 32

Multiple Choice

Mariah Company has inventory at the end of the year with a historical cost of $73,000.Mariah Company uses the perpetual inventory system.Under the LCM rule,the current replacement cost is $70,600.The company uses LIFO.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:

Independent

Not influenced by or dependent on another variable; in statistics, it often means that the occurrence of one event does not affect the probability of another event.

COV(X,Y)

Covariance between two variables X and Y, measuring the extent to which the variables change together and indicating the direction of their linear relationship.

Marginal Probability

The probability of occurring of a single event without consideration of any other events; it’s the likelihood of a single outcome.

Variance

Variance is a statistical measure that represents the degree of spread in a dataset's numbers; it quantifies how far each number in the set is from the mean and thus from every other number in the set.