Mineral Makers (MM) Company Keeps Its Inventory Records Using a Perpetual

question 45

Multiple Choice

Mineral Makers (MM) Company keeps its inventory records using a perpetual system. At December 31, 2019, the unadjusted balance in the inventory account is €64,000. Through a physical count on December 31, 2019, MM determines that its actual merchandise inventory at year-end is €62,500. Which of the following is true regarding the statement of financial position and the income statement of MM at December 31, 2019?

• A) Inventory is increased and cost of goods sold is decreased by €1,500.
• B) Inventory is decreased and cost of goods sold is increased by €1,500.
• C) Inventory is increased and cost of goods sold is increased by €1,500.
• D) Inventory is decreased and cost of goods sold is decreased by €1,500.

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Definitions:

Minimum Gain

The least amount of profit or advantage that can be achieved in a given transaction or situation.

Maximum Gain

The highest possible profit or advantage that can be achieved in a particular situation.

Nash Equilibrium

A situation in strategic interactions where each participant's choice is optimal, considering the decisions of others.

Firm

An organization engaged in commercial, industrial, or professional activities, typically aimed at generating profits.