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

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

Which of the following is NOT included in the cost of merchandise inventory?

Freight-in charges

Purchase discounts

Import duties

Sales commissions paid to sales staff

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Verified step by step guidance

Understand the concept of merchandise inventory cost: Merchandise inventory cost includes all costs incurred to bring the inventory to its current location and condition for sale. This typically includes costs such as purchase price, freight-in charges, import duties, and purchase discounts.

Analyze each option provided: Freight-in charges are costs incurred to transport goods to the business, which are included in inventory cost. Purchase discounts reduce the cost of inventory and are also considered part of inventory accounting. Import duties are taxes paid on imported goods and are included in the inventory cost.

Consider the excluded cost: Sales commissions paid to sales staff are not directly related to acquiring or preparing inventory for sale. These are considered selling expenses and are recorded separately in the income statement, not as part of inventory cost.

Review the accounting treatment: Selling expenses, such as sales commissions, are categorized under operating expenses and are not capitalized as part of inventory cost. This distinction is important for accurate financial reporting.

Conclude the reasoning: Based on the analysis, sales commissions paid to sales staff are not included in the cost of merchandise inventory because they are unrelated to the acquisition or preparation of inventory for sale.