Merchandise inventory becomes part of cost of goods sold when a company
A) receives payment from the customer.
B) pays for the inventory.
C) purchases the inventory.
D) sells the inventory.

Question

Quizplus · Accepted Answer

Merchandise inventory is a current asset on the balance sheet, and it becomes cost of goods sold (COGS) when the inventory is sold to the customer. The cost of the inventory is matched with the revenue from the sale to determine the gross profit of the company. Therefore, when a company sells the inventory, it becomes part of COGS.

Merchandise Inventory Becomes Part of Cost of Goods Sold When