A company started the year with a normal balance of $77,000 in the inventory account. During...

A company started the year with a normal balance of $77,000 in the inventory account. During the year, debits totaling $49,500 and credits totaling $64,000 were posted to the inventory account. Which of the following about the inventory account is correct?

A) The inventory account is decreased by debits

B) After these amounts are posted, the balance in the inventory account is a credit balance of $62,500.

C) The normal balance of the inventory account is a credit balance.

D) the debits and credits posted to the inventory account caused it to decrease by $14,500

Solutions

Expert Solution

INVENTORY REPRESENTS ASSETS.AND AS PER GOLDEN RULES OF ACCOUNTING ASSETS HAVE DEBIT BALANCE.THEREFORE WHEN THERE IS A DEBIT TO ASSETS IT MEANS INCREASE IN ASSETS AND WHEN THERE IS CREDIT TO ASSETS IT MEANS DECREASE IN ASSETS.

IN THE PRESENT CASE INVENTORY IS ALREADY HAVING DEBIT BALANCE OF 77000.AND IN THAT DEBIT OF 49500 AND CREDIT OF 64000 HAS TAKEN PLACE.

HENCE THE BALANCE IN INVENTORY WILL BE 62500 REPRESENTING DEBIT BALANCE.THEREFORE CORRECT IS ANSWER D

ekkarill92 answered 2 years ago

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