Which of the following is/are not true regarding a merchandising firm?
A)Inventory appears on the merchandiser's balance sheet initially as an asset.
B)Inventory is measured at acquisition cost.
C)When a sale takes place, the firm recognizes the cost of the inventory as an expense (cost of goods sold) on the income statement.
D)When a sale takes place, the firm recognizes the inventory reduction on the statement of cash flows.
E)All of the above are false regarding a merchandising firm.

Question

Quizplus · Accepted Answer

When a sale takes place, the firm recognizes the revenue from the sale on the income statement, but does not recognize the inventory reduction on the statement of cash flows. The statement of cash flows only reflects cash transactions, and inventory reductions do not necessarily involve cash transactions (e.g., inventory could be sold on credit). A, B, and C are all true statements regarding a merchandising firm.

Which of the Following Is/are Not True Regarding a Merchandising