Solved by verified expert :Wakefield Company uses a perpetual inventory system.
In August, it sold 2,000 units from its LIFO-base inventory, which had
originally cost $35 per unit. The replacement cost is expected to be $45 per
unit. The company is planning to reduce its inventory and expects to replace
only 1,500 of these units by December 31, the end of its fiscal year. The
company replaced 1,500 units in November at an actual cost of $50 per unit.
1. Based on the preceding information, in the entry in
August to record the sale of the 2,000 units:
A. Cost of Goods Sold will be debited for $70,000.
B. Inventory will be credited for $85,000.
C. Excess of Replacement Cost over LIFO Cost of Inventory Liquidation will
be credited for $15,000.
D. Excess of Replacement Cost over LIFO Cost of Inventory Liquidation will
be credited for $67,000.
2. Based on the preceding information, in the entry to
record the replacement of the 1,500 units in November, Cost of Goods Sold will
be debited for:
A. $52,500.
B. $22,500.
C. $15,000.
D. $7,500.
3. Based on the preceding information, in the entry to
record the replacement of the 1,500 units in November, Inventory will be
debited for:
A. $52,500.
B. $75,000.
C. $67,500.
D. $60,000.
4. Based on the preceding information, in the entry to
record the replacement of the 1,500 units in November, Accounts Payable will be
credited for:
A. $67,500.
B. $75,000.
C. $62,500.
D. $60,000.
5. 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.
