Question

Assume Pina Colada Corp. uses the periodic inventory system and has a beginning inventory balance of $5800, purchases of $65000, and sales of $112000. Pina closes its records once a year on December 31. In the accounting records, the inventory account would be expected to have a balance on December 31 prior to adjusting and closing entries that was:
a. equal to $5800
b. less than $5800
c. more than $5800
d. indeterminate

Answer 1

The inventory account expected to have by December 31 is more than $5800. Option C

How to calculate the end inventory

The formula for end inventory is given as ;

Ending inventory = Beginning inventory + net purchases –sales

Beginning inventory = $5800

Net purchases = $65000

Sales = $112000

Put into the formula

Ending inventory = $ $5800 + 65000 - 112000$

Add first,

Ending inventory = $ $70800 - 112000$

Ending inventory = $ -41, 200

Thus, the inventory account expected to have by December 31 is more than $5800. Option C

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