Mineral Makers (MM) Company Keeps Its Inventory Records Using a Perpetual

Multiple Choice

Mineral Makers (MM) Company keeps its inventory records using a perpetual system.At December 31, 2011, the unadjusted balance in the inventory account is $64,000.Through a physical count on December 31, 2011, MM determines that its actual merchandise inventory at year-end is $62,500.Which of the following is true regarding the statement of financial position and the income statement of MM at December 31, 2011?

A) Inventory is increased and cost of goods sold is decreased by $1,500.
B) Inventory is decreased and cost of goods sold is increased by $1,500.
C) Inventory is increased and cost of goods sold is increased by $1,500.
D) Inventory is decreased and cost of goods sold is decreased by $1,500.