Although late, but I have to share this, as I was suffering from this issue very long! All started somewhen after Catalina update. As I did not use the monitor a lot until Covid Home Office started last year in March, this was not a priority to fix. But in home office this became a real issue. So I spent nights on the topic. LG Support blamed Apple and Apple did not respond. I had a MacBook Pro from 2015 and a MacBook Pro from 2018. Both having the issue the LG 27UK850-W being recognized as LG ultrawide. Eventually after googling around I found a solution working somehow for me.
I purchases SwitchResX and was able to set custom resolutions. Even scaled HDPi solutions were working and this was find UNTIL....
I purchased a MacBook Air 2020 with M1 chip and Big Sur installed. I was thrilled with the new machine BUT.... The LG suffered again from the same issue. Detected as LG Ultrawide. I thought, hey, no issue, I solved that problem on 2 macs using SwitchResX, so lets do it a 3rd time. But suddenly, on the M1 somehow SwitchResX does not allow custom resolutions anymore.... Damn... :-(
So again I spend hours in the net, googling on how to overwrite EDID on Big Sur and so on... But then I accidentally found a article explaining on how on the LG to enter the service menu. So I gave it a try. On a first glance not much success, I just switched on and off all settings and restarted the monitor. AND the aspect ration of the monitor showing properly again, monitor reported as LG 4K HDR!? How? I did actually not change a single setting. I just changed and changed them back. So if anybody wants to try the same do:
1. ) Switch Off Monitor
2.) On the Joystick press LEFT, LEFT, LEFT, RIGHT
3.) Switch On the monitor by pressing on the joystick
4.) Go to Settings.
If it worked the menu should be somehow on top left (see attached images)
I then did the following
1.) Select ToolOptions -> Joystick RIGHT
2.) Select ToolOption 1 -> Joystick RIGHT
3.) Select Output Type -> Joystick RIGHT choose VByOne Press Joystick
4.) Again Select ToolOption 1 -> Joystick RIGHT
5.) Select Output Type -> Joystick RIGHT until it is again eDP
6.) Press Joystick and then Joystick LEFT -> menu should quite
7.) Switch off monitor
Dring a coffee ( I actually made a break, because it did not immediately show anything)
8.) Switch on monitor and connect your Mac. Done
In my case it fixed it. I'm not 100% sure which other options I toggled on and off during the procedure before. But some of it must have triggered somehow a kind of RESET. At least now my new MacBook Air and also the MacBook Pro 2018 show the Monitor as LG 4K HDR with proper resolutions, even HDPI. So I hope this helps someone with the same trouble.