Question

Assume that a government purchases $85,000 of inventory for the General Fund during the year. The General Fund began the year with an inventory balance of $15,000 and ended the year with a balance of $35,000. The General Fund uses the consumption method of inventory accounting and a perpetual inventory system. The General Fund should report

Answer 1

To find the amount of inventory used by the General Fund, subtract the ending inventory balance from the sum of the starting inventory and purchases, resulting in an inventory consumption of $65,000 for the year.

Step-by-step explanation:

The question involves calculating the amount of inventory used during the year for the General Fund using the consumption method and a perpetual inventory system. To determine the amount of inventory used, one begins with the starting inventory balance, adds the purchases made during the year, and then subtracts the ending inventory balance.

Starting Inventory + Purchases - Ending Inventory = Inventory Used
$15,000 + $85,000 - $35,000 = $65,000

Therefore, the General Fund should report an inventory consumption of $65,000 for the year.