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Robyn's Retail had 500 units of inventory on hand at the end of the year. These...

Robyn's Retail had 500 units of inventory on hand at the end of the year. These were recorded at a cost of $19 each using the last-in, first-out (LIFO) method. The current replacement cost is $17 per unit. The selling price charged by Robyn's Retail for each finished product is $27. In order to record the adjusting entry needed under the lower-of-cost-or-market rule, the Merchandise Inventory will be ________.

Group of answer choices

A. debited by $8,500

B. credited by $8,500

C. debited by $1,000

D. credited by $1,000

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Answer #1

Answer: D. credited by $1,000

Cost of ending inventory = 500 x $19 = $9,500

Replacement cost of ending inventory = 500 x $17 = $8,500

Under the lower-of-cost-or-market rule, the ending inventory will be valued at $8500. The adjusting entry will debit the loss on inventory write-down and credit merchandise inventory by $9,500 - $8,500 = $1,000. Thus, option D. is the correct answer.

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