At December 31, the Wendy Company Has Ending Inventory with a Historical

Multiple Choice

At December 31, the Wendy Company has ending inventory with a historical cost of $631,000 valued using FIFO. Assume the company uses the perpetual inventory system. The net realizable value of the inventory is $614,000. The normal profit on this inventory is $50,000. Before any adjustments at the end of the period, the cost of goods sold account has a balance of $900,000. Following U.S. GAAP, which journal entry is required on December 31 to adjust the ending balance of inventory if the indirect method is used?

A) Debit Cost of Goods Sold for $33,000 and credit Inventory for $33,000.
B) Debit Inventory for $33,000 and credit Cost of Goods Sold for $33,000.
C) Debit Cost of Goods Sold for $17,000 and credit Inventory for $17,000.
D) Debit Loss on Inventory Writedown for $17,000 and credit Allowance to Reduce Inventory to Market for $17,000.