Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Merchandising Company vs. Manufacturing Company

Financial Accounting

5. Inventory

Merchandising Company vs. Manufacturing Company

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Multiple Choice

Which of the following businesses is most likely to use a process costing system?

A company that produces identical cans of paint in large batches

A jewelry store selling unique, handcrafted pieces

A law firm providing customized legal services

A car dealership selling various models of vehicles

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Verified step by step guidance

Understand the concept of process costing: Process costing is a method used by companies that produce large quantities of identical or similar products. Costs are accumulated for each process or department, and then averaged over the units produced.

Analyze the characteristics of the businesses listed: A company producing identical cans of paint in large batches fits the criteria for process costing because the production is continuous and the products are homogeneous.

Compare the other options: A jewelry store selling unique, handcrafted pieces would use job costing because each piece is unique and requires individual tracking of costs. Similarly, a law firm providing customized legal services would use job costing as each case is distinct. A car dealership selling various models of vehicles would likely use a different costing system, such as job costing or activity-based costing, depending on the nature of their operations.

Identify the correct match: The company producing identical cans of paint in large batches aligns with the characteristics of a process costing system, as the production is standardized and costs are averaged across units.

Conclude the reasoning: Based on the analysis, the business most likely to use a process costing system is the company producing identical cans of paint in large batches.