Camping Gear Inc had 600 units of inventory on hand at the e

Camping? Gear, Inc. had 600 units of inventory on hand at the end of the year. These were recorded at a cost of? $17 each using the

lastminus??in,

firstminus?out

?(LIFO) method. The current replacement cost is? $15 per unit. The selling price charged by Camping? Gear, Inc. for each finished product is? $23. As a result of recording the adjusting entry as per the

lowerminus?ofminus?costminus?orminus?market

?rule, the gross profit will? ________.

A.

decrease by? $1,200

B.

decrease by? $9,000

C.

increase by? $9,000

D.

increase by? $1,200

Solution

A. decrease by? $1,200

As a result of recording the adjusting entry as per the lower?of?cost?or?market ?rule, the gross profit will:

= (600 * $17) - (600 * $15)

= $10,200 - $9,000

= $1,200