Product costs that have become expenses can be found in:

• A. Retained Earnings on the statement of stockholders' equity
• B. Inventory on the balance sheet
• C. Accounts Receivable on the balance sheet
• D. Cost of Goods Sold on the income statement

Answer: (D)

Verified step by step guidance

1. Understand the concept of product costs: Product costs are costs incurred to create a product, including direct materials, direct labor, and manufacturing overhead. These costs are initially recorded as inventory on the balance sheet.
2. Recognize when product costs become expenses: Product costs become expenses when the goods are sold. At this point, they are transferred from inventory on the balance sheet to Cost of Goods Sold (COGS) on the income statement.
3. Identify the role of Cost of Goods Sold (COGS): COGS represents the direct costs associated with the production of goods that have been sold during a specific period. It is an expense reported on the income statement.
4. Understand why other options are incorrect: Retained Earnings on the statement of stockholders' equity reflects accumulated profits or losses, not product costs. Inventory on the balance sheet represents unsold goods, and Accounts Receivable on the balance sheet represents amounts owed by customers, neither of which are related to product costs that have become expenses.
5. Conclude that the correct answer is Cost of Goods Sold on the income statement, as this is where product costs are reported once the goods are sold and become expenses.