Second Street Company Has 10 Units in Ending Merchandise Inventory

question 91

Multiple Choice

Second Street Company has 10 units in ending merchandise inventory on December 31.The units were purchased in November for $180 each.The price lists from suppliers indicate the current replacement cost of the item to be $174 each.Which of the following statements is TRUE of the effects of the adjustments to ending merchandise inventory and the cost of goods sold?

• A) The cost of goods sold would increase by $6.
• B) The cost of goods sold would not be affected.
• C) The cost of goods sold would decrease by $60.
• D) The cost of goods sold would increase by $60.

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Definitions:

Factory Building Utilities

Expenses related to utilities within a factory building, including costs for electricity, gas, water, and sewage.

Direct Costs

Costs directly associated with the manufacturing of specific products or services, including labor and raw materials.

Indirect Costs

Expenses not directly tied to a specific project, product, or activity, such as administrative salaries and facility maintenance.

Office Equipment Depreciation

Office equipment depreciation is an accounting method to allocate the cost of office assets over their useful lives for reporting their wear and tear, usage, or obsolescence.