A Company Uses the Periodic Inventory Method and the Beginning

question 129

Short Answer

A company uses the periodic inventory method and the beginning inventory is overstated by $4,000 because the ending inventory in the previous period was overstated by $4,000; the ending inventory for this period is correct.The amounts reflected in the current end of the period balance sheet are

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Definitions:

Opportunity Cost

The foregone benefit of the next best alternative when a decision is made to choose one option over another.

Allocative Efficiency

Occurs when no resources are wasted; it is not possible to make any person better off without making someone else worse off.

Economic Problem

The challenge of limited resources to meet unlimited wants and needs of society.

Capital Goods

Long-lasting goods purchased or used by businesses to produce goods or services and not intended for final consumption.