PRC-1 · Chapter 7 · Question 3 of 100
When inventory is sold, how is its carrying amount treated in the financial statements?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) It is recognized as an expense (Cost of Sales) in the period in which the related revenue is recognized.
Explanation
Under the matching principle, when goods are sold, their carrying amount is removed from the balance sheet and recognized as an expense (Cost of Sales) to match the revenue generated.
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