If a Company Has Zero Beginning Inventory and Zero Ending

question 46

Multiple Choice

If a company has zero beginning inventory and zero ending inventory which of the following is true?

• A)Cost of goods sold will equal cost of goods manufactured.
• B)Cost of goods sold will be zero.
• C)Cost of goods manufactured will be zero.
• D)Inventory levels will fluctuate each period.

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Definitions:

Guaranteed Residual Value

An assurance that an asset will have a specified value at the end of its lease term.

Capital Lease

A lease agreement that is classified as a purchase of assets for accounting purposes, where the lessee assumes some of the risks and benefits of ownership.

Leased Equipment

Assets obtained for use by leasing rather than purchasing, allowing companies to use equipment without owning it.

Depreciation Expense

The allocated amount of the cost of an asset expensed each period over its useful life, reflecting wear and tear or obsolescence.