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 items appears only in a manufacturing company's financial statements?

Cost of Goods Sold

Accounts Receivable

Work in Process Inventory

Merchandise Inventory

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Verified step by step guidance

Understand the context: Manufacturing companies have unique accounts in their financial statements that reflect the production process. These accounts are not typically found in service or merchandising companies.

Identify the key term: 'Work in Process Inventory' refers to partially completed goods that are still in the production process. This account is specific to manufacturing companies because it tracks the costs of materials, labor, and overhead for goods that are not yet finished.

Compare with other options: 'Cost of Goods Sold' and 'Accounts Receivable' appear in the financial statements of all types of companies, including manufacturing, merchandising, and service companies. 'Merchandise Inventory' is specific to merchandising companies, which purchase finished goods for resale.

Recognize the distinction: Manufacturing companies use 'Work in Process Inventory' to account for goods in production, while merchandising companies use 'Merchandise Inventory' to account for goods ready for sale.

Conclude the reasoning: The correct answer is 'Work in Process Inventory' because it is unique to manufacturing companies and reflects the production process, which is absent in merchandising or service companies.