The input cost changes that occur after the purchase of inventory items in a current cost accounting system are recognized as
A)realized gains and losses.
B)unrealized holding gains and losses.
C)extraordinary gains and losses.
D)costs of goods solD.

Question

Quizplus · Accepted Answer

In a current cost accounting system, changes in input costs after the purchase of inventory items are recognized as unrealized holding gains and losses. These gains and losses are not realized until the inventory items are sold, and they represent fluctuations in the value of inventory due to changes in market prices. This is different from realized gains and losses, which occur when the inventory items are sold for a different price than the purchase price, and from extraordinary gains and losses, which are non-recurring events that are not part of the normal course of business. Costs of goods sold represent the expenses incurred in producing and selling the inventory items, and they are recognized when the items are sold, not when input costs change.

The Input Cost Changes That Occur After the Purchase of Inventory