A company loses it opening financial records in a fire.During the following year, it incurred costs of production of $250,000 and sold $300,000 in merchandise.It took an inventory count and found that it had $100,000 in product on hand.What should the company's opening inventory show before the fire?
A)$50,000
B)$100,000
C)$150,000
D)Cannot be determined from the above information

Question

Quizplus · Accepted Answer

To determine the opening inventory, we need to use the cost of goods sold equation:
Cost of Goods Sold = Beginning Inventory + Purchases - Ending Inventory

We know:
- Cost of Goods Sold = $250,000 (costs of production)
- Ending Inventory = $100,000 (based on inventory count)

Substituting in the values we have:
$250,000 = Beginning Inventory + $300,000 - $100,000

Simplifying the equation:
$250,000 = Beginning Inventory + $200,000

Therefore, the beginning inventory should show as $150,000 ($250,000 - $200,000). Thus, the correct choice is C.

A Company Loses It Opening Financial Records in a Fire