Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Merchandising Company vs. Manufacturing Company

Financial Accounting

5. Inventory

Merchandising Company vs. Manufacturing Company

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Multiple Choice

Which of the following best describes merchandise inventory for a merchandising company?

Supplies used in administrative activities

Raw materials used in the production process

Goods purchased for resale to customers in their finished form

Work in process inventory awaiting completion

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Verified step by step guidance

Understand the concept of merchandise inventory: Merchandise inventory refers to goods that a merchandising company purchases with the intention of reselling them to customers in their finished form. It does not include raw materials, work-in-process inventory, or supplies used in administrative activities.

Differentiate between inventory types: Merchandise inventory is specific to merchandising companies, while raw materials and work-in-process inventory are associated with manufacturing companies. Supplies used in administrative activities are not considered inventory.

Analyze the options provided: Evaluate each option to determine whether it aligns with the definition of merchandise inventory. Supplies used in administrative activities and raw materials used in production do not fit the definition. Work-in-process inventory is also not applicable to merchandising companies.

Identify the correct description: The correct description of merchandise inventory for a merchandising company is 'Goods purchased for resale to customers in their finished form.' This matches the definition and purpose of merchandise inventory.

Conclude the reasoning: Merchandise inventory is a key asset for merchandising companies, as it represents the products they sell directly to customers without further processing or manufacturing.