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Below is information regarding inventory purchased and sold by Pikes Peak Tea Company: Pikes Peak had no beginning inventory in 2016, and during 2016 it purchased inventory of 100 tea kettles for $60 each. In 2017, Pikes Peak Tea Company sold 80 tea kettles for a retail price of $90 each. In 2018, the replacement cost of the tea kettles changed to $50 per tea kettle. Pikes Peak did not sell any inventory in 2018. Which of the following statements are correct for Pikes Peak Tea Company?

I. Pikes Peak would have a total ending inventory of $1,200 at the end of 2018
II. Pikes Peak would record a credit to inventory for a total of $4,800 in 2017
III. Pikes Peak would record a debit to cost of goods sold for $200 in 2018

a. I, II, and Ill are all correct statements
b. ll and Ill are the only correct statements, not
c. I and II are the only correct statements, not III
d. III is the only correct statement, not I and II
e. ll is the only correct statement, not I or III

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Answer:

The correct answer is option (c) I and II are the only correct statements, not III

Explanation:

Solution

Given:

From the question stated, we are to find the correct Pikes Peak Tea Company.

Now,

Just As the pikes peal tea company purchased 100 kettles at $60 each and sold it for  80 kettles

Hence, the company had 20 kettles that was priced at at 60 each that is, $1,200. then, the Inventory resulted to $4,800 (80 * $60) and sold by the company and has to be credited in the Inventory ledger.

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