Gotham City acquires $25,000 of inventory on November 1,2007,having held no inventory previously.On December 31,2007,the end of Gotham City's fiscal year,a physical count shows $8,000 still in stock.During 2008,$6,500 of this inventory is used,resulting in a $1,500 remaining balance of supplies on December 31,2008.
-Based on the preceding information,which of the following would be the correct account balances for 2007 if Gotham City used the consumption method of accounting for inventories?

Question

Quizplus · Accepted Answer

Under the consumption method, the cost of inventory used is recorded as an expense. For 2007, the inventory used is $25,000 - $8,000 = $17,000. Therefore, the expense account would show $17,000, and the inventory account would show $8,000.

Gotham City Acquires $25,000 of Inventory on November 1,2007,having Held