For manufacturing firms, the cost of completed products remains on the balance sheet as __________ assets until the firm sells the products; upon sale, the cost of the assets becomes a cost of goods sold expense.
A)Direct Materials Inventory
B)Work-in Progress Inventory
C)Finished Goods Inventory
D)Cost of Products Ready for Sale
E)none of the above

Question

Quizplus · Accepted Answer

Finished Goods Inventory represents the cost of completed products that have not yet been sold. Once the products are sold, the cost is transferred from Finished Goods Inventory to Cost of Goods Sold. Direct Materials Inventory represents the cost of raw materials, Work-in-Progress Inventory represents the cost of products that are in the process of being manufactured, and Cost of Products Ready for Sale is not a standard accounting term.

For Manufacturing Firms, the Cost of Completed Products Remains on the Balance