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

Physical Inventory Count, Ownership of Goods, and Consigned Goods

Financial Accounting

5. Inventory

Physical Inventory Count, Ownership of Goods, and Consigned Goods

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Multiple Choice

Which of the following best describes merchandise inventory?

Supplies used in the daily operations of the business.

Goods in transit shipped FOB destination to a customer.

Goods held on consignment for another company.

Goods owned by a company and held for sale in the ordinary course of business.

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Verified step by step guidance

Understand the concept of merchandise inventory: Merchandise inventory refers to goods that a company owns and holds for sale in the ordinary course of business. It is a key component of current assets on the balance sheet.

Analyze the options provided in the question: Each option describes a different type of asset or situation. Supplies used in daily operations are not merchandise inventory; they are categorized as supplies or operating expenses. Goods in transit shipped FOB destination are not yet owned by the company. Goods held on consignment are owned by another company.

Focus on the correct definition: Merchandise inventory specifically includes goods that are owned by the company and are intended for sale to customers. This excludes items like supplies, consigned goods, or goods in transit under FOB destination terms.

Relate the concept to accounting principles: Merchandise inventory is recorded at cost and is adjusted for factors like purchase discounts, freight costs, and inventory valuation methods (e.g., FIFO, LIFO, or weighted average).

Conclude with the correct answer: The correct description of merchandise inventory is 'Goods owned by a company and held for sale in the ordinary course of business.' This aligns with the accounting definition and treatment of inventory.