A Company Has Inventory of 10 Units at a Cost

question 27

Multiple Choice

A company has inventory of 10 units at a cost of $10 each on June 1. On June 3, they purchased 20 units at $12 each. 12 units are sold on June 5. Using the FIFO perpetual inventory method, what is the cost of the 12 units that were sold?

• A)$120
• B)$124
• C)$128
• D)$130
• E)$140

Prepare and record transactions in journal entries.

Understand the purpose and process of posting transactions from the journal to the ledger.

Distinguish between various financial periods, including fiscal and natural business years.

Explain the rationale behind specific journal entries.

---

Definitions:

Deferred Revenues

Deferred revenues refer to money received by a business for goods or services yet to be delivered or performed, recorded as a liability on the balance sheet until the obligation is fulfilled.

Working Capital

The difference between a company's current assets and current liabilities, indicating the short-term financial health and operational efficiency of a business.

Long-Term Liabilities

All of the entity’s obligations that are not classified as current liabilities.