T operates a hardware store, selling primarily to the public.The company's average sales are $900,000.Which of the following costs must it capitalize in accounting for its inventory?
A)Freight
B)Utility costs of a warehouse several miles from the retail outlet
C)An allocable portion of general and administrative costs
D)Salary cost of person in charge of purchasing inventory
E)More than one of the above

Question

Quizplus · Accepted Answer

The company must capitalize freight costs associated with the acquisition of inventory as part of their inventory cost. Utility costs of a warehouse several miles away would not be capitalized as inventory cost, as they are not directly related to the inventory acquisition. An allocable portion of general and administrative costs and salary cost of the person in charge of purchasing inventory are also not capitalized as inventory cost, as they are not directly related to the acquisition and production of inventory.

T Operates a Hardware Store, Selling Primarily to the Public