Gotham City acquires $25,000 of inventory on November 1,20X7,having held no inventory previously.On December 31,20X7,the end of Gotham City's fiscal year,a physical count shows $8,000 still in stock.During 20X8,$6,500 of this inventory is used,resulting in a $1,500 remaining balance of supplies on December 31,20X8.
-Based on the preceding information,which of the following would be the correct account balances for 20X8 if Gotham City used the consumption method of accounting for inventories?

Question

Quizplus · Accepted Answer

Under the consumption method, the cost of goods sold is determined by subtracting the ending inventory from the beginning inventory and adding any purchases made during the year.

Beginning inventory (Nov. 1, 20X7): $25,000 
Ending inventory (Dec. 31, 20X7): $8,000 
Purchases made during 20X8: $0 (since no information is given)

Cost of goods sold for 20X7: $25,000 - $8,000 = $17,000 
Cost of goods remaining at the end of 20X8: $1,500

Therefore, the correct account balances for 20X8 would be: 
- Cost of Goods Sold: $17,000 
- Ending Inventory: $1,500

Gotham City Acquires $25,000 of Inventory on November 1,20X7,having Held