First Street,Inc

question 60

Multiple Choice

First Street,Inc.has 7 units in ending merchandise inventory on December 31.The units were purchased in November for $200 each.The price lists from suppliers indicate the current replacement cost of the item to be $196 each.Which of the following statements is true of the effects of the adjustments to ending merchandise inventory on the cost of goods sold?

• A)The cost of goods sold would increase by $4.
• B)The cost of goods sold would not be affected.
• C)The cost of goods sold would decrease by $28.
• D)The cost of goods sold would increase by $28.

Explain the importance of incremental costs and benefits in decision-making processes.

Analyze the financial impact of make or buy, and sell or process further decisions.

Calculate the minimum acceptable price for selling or purchasing products based on relevant costs.

Evaluate the profitability of using existing resources versus obtaining new resources.

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Definitions:

Depreciation

The process of allocating the cost of a tangible asset over its service life, reflecting the decrease in value over time.

Land's Cost

The purchase price of land plus any additional costs spent to put it into use, such as legal fees and land grading expenses.

Prepaid Insurance

An asset account that reflects the amount paid for insurance policies in advance, before the coverage period.

Insurance Expense

This refers to the costs incurred by a business or individual as a result of purchasing insurance to protect against risks.