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

Quizplus · Accepted Answer

Under the consumption method of accounting for inventories, the cost of goods sold is recognized as soon as the goods are sold or used, rather than waiting for the end of the accounting period. This means that the ending inventory will be based only on the items that were not sold or used during the accounting period. 
In option A, the ending inventory includes all of the items purchased during the year, which is not correct under the consumption method. 
In option B, the cost of goods sold calculation is correct, but the ending inventory includes all of the items purchased during the year, which again, is not correct under the consumption method. 
In option D, the cost of goods sold calculation is not correct, as it includes the beginning inventory and all of the purchases during the year. 
Option C, however, correctly calculates the cost of goods sold based on the items that were sold or used during the year, and the ending inventory only includes the items that were not sold or used. Therefore, option C is the correct choice for the account balances for 20X8 under the consumption method of accounting for inventories.

Based on the Preceding Information, Which of the Following Would