When Interim Accounting Reports Are Prepared on a Worksheet and the Periodic

question 3

Multiple Choice

When interim accounting reports are prepared on a worksheet and the periodic method of accounting for inventory is used, closing inventory is:

• A) recorded in the income statement debit column as a deduction from cost of sales and in the balance sheet debit column as a current asset.
• B) recorded in the income statement credit column as a deduction from cost of sales and in the balance sheet debit column as a current asset.
• C) not recorded.
• D) is recorded as a debit to the inventory asset account and as credit to the gross profit account.

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Definitions:

Property Tax

A levy imposed by a government on a property owner, based on the value of the property.

Accrue

The process of accumulating or recognizing expenses or income over time, even before cash transactions occur.

Payable

A liability to a creditor, often of a business, that represents an obligation to pay for goods or services received.

Prepaid Insurance

An asset account that represents insurance premiums paid in advance, covering future periods.