Question

A company started the year with a normal balance of $68,000 in the Inventory account. During the year the following amounts were posted to the account: Debits of $45,000 and credits of $55,000. Choose the TRUE statement.

A. After these amounts are posted, the balance in the Inventory account is a credit balance of $58,000.
B. The normal balance of the Inventory account is a credit balance.
C. The inventory account is decreased by debits.
D.The debits and credits posted to the Inventory account caused it to decrease by $10,000.
E. More than one of the above statements are true

Answer 1

The correct answer is D

Step-by-step explanation:

Inventory is the term which is defined as the goods as well as materials that the business hold for the final goal or objective of resale.

Inventory is the asset account, which has a normal debit balance. And the inventory account decreased with credits and increased with debits.

So, now computing inventory account balance as:

Ending debit balance = Beginning balance (debit) + Total of Debits - Total of Credits

$58,000 = $68,000 + $45,000 - $55,000

As the consequence, the balance of inventory account is reduced through $10,000.