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 statements regarding merchandise inventory is false?

Merchandising companies typically have only one inventory account on their balance sheet.

Merchandise inventory includes raw materials, work in process, and finished goods.

Merchandise inventory represents goods purchased for resale in their finished form.

Merchandise inventory appears as a current asset on the balance sheet of a merchandising company.

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Verified step by step guidance

Step 1: Understand the concept of merchandise inventory. Merchandise inventory refers to goods that a merchandising company purchases for resale in their finished form. It is distinct from manufacturing inventory, which includes raw materials, work in process, and finished goods.

Step 2: Review the characteristics of merchandising companies. Merchandising companies typically have only one inventory account on their balance sheet, as they deal with finished goods ready for resale rather than multiple stages of production.

Step 3: Analyze the classification of merchandise inventory on the balance sheet. Merchandise inventory is classified as a current asset because it is expected to be sold within the normal operating cycle of the business.

Step 4: Compare the statements provided in the problem. Identify the statement that incorrectly describes merchandise inventory. Specifically, note that merchandise inventory does not include raw materials, work in process, and finished goods, as these are associated with manufacturing companies.

Step 5: Conclude that the false statement is the one claiming merchandise inventory includes raw materials, work in process, and finished goods, as this is not applicable to merchandising companies.