A Major Difficulty in the Verification of Inventory Cost Records

question 22

Multiple Choice

A major difficulty in the verification of inventory cost records for the purpose of inventory valuation is in determining the reasonableness of the

• A) direct labor costs.
• B) raw material costs.
• C) manufacturing overhead costs.
• D) period costs.

---

Definitions:

Prepaid Insurance

An asset account representing insurance payments made in advance of the coverage period, recognized as an expense over time.

Insurance Payable

A liability account that represents amounts owed for insurance premiums that are due but not yet paid.

Proprietorship

A business owned by one individual.

Drawing

Drawing refers to the withdrawal of cash or other assets from a company by the owner(s) for personal use, decreasing the owner's equity in the business.