First Street,Inc

Multiple Choice

First Street,Inc.has 7 units in ending merchandise inventory on December 31.The units were purchased in November for $200 each.The price lists from suppliers indicate the current replacement cost of the item to be $196 each.Which of the following statements is true of the effects of the adjustments to ending merchandise inventory on the cost of goods sold?

A) The cost of goods sold would increase by $4.
B) The cost of goods sold would not be affected.
C) The cost of goods sold would decrease by $28.
D) The cost of goods sold would increase by $28.