Based on the preceding information, which of the following would be the correct account balances for 20X8 if Gotham City used the purchase method of accounting for inventories?
A) Option A
B) Option B
C) Option C
D) Option D

Question

Based on the preceding information, which of the following would be the correct account balances for 20X8 if Gotham City used the purchase method of accounting for inventories? 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Quizplus · Accepted Answer

Based on the information provided, the purchase method of accounting for inventories is used. Under this method, inventory is recorded when it is purchased, rather than when it is sold.

Beginning inventory (20X7) = $10,000 
Add: Purchases = $60,000 
Total inventory available for sale = $70,000

Cost of goods sold = $40,000 
Ending inventory (20X8) = $30,000

Therefore, the correct account balances for 20X8 would be:
- Cost of goods sold = $40,000 
- Ending inventory = $30,000

Based on the Preceding Information, Which of the Following Would