Which of the following statements is TRUE of the flow of product and period costs for a manufacturer?
A) When the manufacturing process is completed, the costs are transferred to the Work-in-Process Inventory account.
B) The cost of the finished goods that the manufacturer sells becomes its Cost of Goods Sold on the income statement.
C) Period costs remain in inventory accounts on the balance sheet until the product is sold.
D) All product costs that have been paid are expensed and reported on the income statement at the end of the accounting period.

Question

Quizplus · Accepted Answer

Product costs, such as direct materials, direct labor, and manufacturing overhead, are initially recorded in the Work-In-Process Inventory account during the manufacturing process. When the product is completed, the costs are transferred to the Finished Goods Inventory account. When the finished goods are sold, the cost of the goods sold is transferred from the Finished Goods Inventory to the Cost of Goods Sold account on the income statement. Period costs, such as selling and administrative expenses, are expensed in the period they are incurred and are not included in the inventory accounts.

Which of the Following Statements Is TRUE of the Flow