Question

When completed units are transferred to the warehouse:

A. Cost of Goods Sold account is debited.
B. Cost of Goods Manufactured account is debited.
C. Finished Goods Inventory account is debited.
D. Work-in-Process Inventory account is debited.
E. Finished Goods Inventory account is credited.

Answer 1

When completed units of goods are transferred to the warehouse, the correct accounting entry is to debit the Finished Goods Inventory account, reflecting an increase in available finished goods for sale.

Step-by-step explanation:

The question pertains to the accounting treatment when completed units are transferred to the warehouse in a manufacturing business. When units are completed in production, they move from the Work-in-Process Inventory to the Finished Goods Inventory. Therefore, the correct entry would be debiting (increasing) the Finished Goods Inventory account and crediting (reducing) the Work-in-Process Inventory account.

The right answer to the question is C. Finished Goods Inventory account is debited, indicating the company now has more finished goods available for sale. This transaction does not immediately affect the Cost of Goods Sold as that occurs when the goods are actually sold. Similarly, the Cost of Goods Manufactured account captures the costs up to the point of completion but is not directly affected by the transfer to the warehouse.