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

Multiple Choice

At December 31,the Selig Company has ending inventory with a historical cost of $630,000.Assume the company uses the perpetual inventory system.The current replacement cost of the inventory is $608,000.The net realizable value is $650,000.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 direct method is used?

A) Debit Cost of Goods Sold for $20,000 and credit Inventory for $20,000.
B) Debit Inventory for $20,000 and credit Cost of Goods Sold for $20,000.
C) Debit Cost of Goods Sold for $22,000 and credit Inventory for $22,000.
D) Debit Inventory for $22,000 and credit Cost of Goods Sold for $22,000.