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

Financial Statement Effects of Inventory Costing Methods

Financial Accounting

5. Inventory

Financial Statement Effects of Inventory Costing Methods

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Product costs that have become expenses can be found in:

Retained Earnings on the statement of stockholders' equity

Inventory on the balance sheet

Accounts Receivable on the balance sheet

Cost of Goods Sold on the income statement

Previous problemNext problem

Verified step by step guidance

Understand the concept of product costs: Product costs are costs incurred to create a product, including direct materials, direct labor, and manufacturing overhead. These costs are initially recorded as inventory on the balance sheet.

Recognize when product costs become expenses: Product costs become expenses when the goods are sold. At this point, they are transferred from inventory on the balance sheet to Cost of Goods Sold (COGS) on the income statement.

Identify the role of Cost of Goods Sold (COGS): COGS represents the direct costs associated with the production of goods that have been sold during a specific period. It is an expense reported on the income statement.

Understand why other options are incorrect: Retained Earnings on the statement of stockholders' equity reflects accumulated profits or losses, not product costs. Inventory on the balance sheet represents unsold goods, and Accounts Receivable on the balance sheet represents amounts owed by customers, neither of which are related to product costs that have become expenses.

Conclude that the correct answer is Cost of Goods Sold on the income statement, as this is where product costs are reported once the goods are sold and become expenses.