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

Inventory Errors

Financial Accounting

5. Inventory

Inventory Errors

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Multiple Choice

Which of the following is NOT considered an inventory cost?

Insurance on inventory in transit

Cost of goods purchased

Freight-in on purchased goods

Advertising expenses for selling inventory

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Verified step by step guidance

Understand the concept of inventory costs: Inventory costs typically include all costs necessary to bring inventory to its present location and condition for sale. These costs generally include the cost of goods purchased, freight-in, and other costs directly related to inventory acquisition.

Analyze each option provided: Review each cost to determine if it is directly related to acquiring or preparing inventory for sale.

Option 1: 'Insurance on inventory in transit' - This is considered an inventory cost because it is directly related to protecting the inventory while it is being transported to its location.

Option 2: 'Cost of goods purchased' - This is a fundamental inventory cost as it represents the purchase price of the goods intended for resale.

Option 4: 'Advertising expenses for selling inventory' - This is NOT an inventory cost because it is a selling expense, which is incurred after the inventory is ready for sale and is related to promoting the sale of inventory, not acquiring or preparing it.