McCarthy Company Has Inventory of 8 Units at a Cost

question 209

Multiple Choice

McCarthy Company has inventory of 8 units at a cost of $200 each on October 1. On October 2, it purchased 20 units at $205 each. 11 units are sold on October 4.
-Using the FIFO perpetual inventory method, what is the value of inventory after the October 4 sale?

• A) $3,485.
• B) $3,445.
• C) $3,461.
• D) $3,472.
• E) $3,500.

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Definitions:

Erosion

In finance, the gradual reduction of the value of an asset or earnings, often due to external factors or new projects cannibalizing existing project revenues.

Incremental Cash Flows

The additional cash flows a business expects to generate from taking on a new project or making an investment decision.

After-Tax Salvage Value

The net value of an asset after it has been disposed of and all related taxes have been paid.

Capital Budgeting Analysis

The process of evaluating and selecting long-term investments that are in line with the goal of an investor or firm's strategic plan.