Which of the following would be considered merchandise inventory?Multiple choice question.Raw materialsPurchased finished goodsWork in processCost of goods sold
Question
Which of the following would be considered merchandise inventory?Multiple choice question.Raw materialsPurchased finished goodsWork in processCost of goods sold
Solution
Merchandise inventory refers to the goods a company has on hand to sell to customers. It is a current asset on a company's balance sheet.
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Raw materials: These are the basic materials that are used to produce goods or products. They are not considered merchandise inventory because they are not yet in a sellable state.
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Purchased finished goods: These are goods that a company has bought from a manufacturer or wholesaler to sell to customers. They are considered merchandise inventory because they are ready to be sold.
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Work in process: This refers to goods that are in the process of being manufactured but are not yet complete. They are not considered merchandise inventory because they are not in a sellable state.
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Cost of goods sold: This is the cost of producing the goods sold by a company. It is not considered merchandise inventory because it is an expense, not an asset.
So, the answer to the question "Which of the following would be considered merchandise inventory?" is Purchased finished goods.
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