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.

Question

Quizplus · Accepted Answer

If the company decides not to replace any units, then they will need to eliminate any valuation accounts related to the inventory that will not be replaced. This means that they will need to credit their Excess of Replacement Cost over LIFO Cost of Inventory Liquidation account for $22,500 (the amount that was originally debited when the replacement was planned). Since the company will not be replacing any units, they will need to recognize the loss by debiting their Cost of Goods Sold account for $15,000 (the difference between the original cost and market value of the 1,500 units). There is no need to credit/debit their Inventory account since they are not making any changes to their physical inventory.

Assume That the Replacement Did Not Happen in November