Tehran Ltd

question 109

Multiple Choice

Tehran Ltd.uses FIFO to cost its inventory.The following information is available for Tehran's inventory of product # 101:
Beginning inventory: 120 units @ $3.14 per unit
March 1: Purchase of 250 units @ $3.50 per unit
April 10: Sale of 100 units @ $5.10 per unit
Assuming Tehran uses the perpetual inventory system, the second entry to account for the April 10 sale is

• A)debit Cost of Goods Sold and credit Inventory, $350.
• B)debit Cost of Goods Sold and credit Purchases, $350.
• C)debit Cost of Goods Sold and credit Inventory, $314.
• D)debit Cost of Goods Sold and credit Purchases, $314.

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Definitions:

Prepaid Insurance

Payments made in advance for insurance coverage, classified as a current asset on the balance sheet until the coverage period expires.

Revenue Recognition Principle

An accounting principle that dictates the specific conditions under which revenue is recognized or accounted for.

Actual Cost

The actual expenses and costs incurred in acquiring or producing a product or offering a service.

Accounts Payable

Accounts payable is the amount of short-term debt or money owed to suppliers and creditors by a company for goods and services purchased on credit.