The following statements regarding merchandise inventory are true except:
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Merchandise inventory is reported on the balance sheet as a current asset.
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Merchandise inventory refers to products a company owns and intends to sell.
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Merchandise inventory may include the costs of freight in and making them ready for sale.
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Merchandise inventory appears on the balance sheet of a service company.
The following statements regarding merchandise inventory are true except:
-
Merchandise inventory is reported on the balance sheet as a current asset.
-
Merchandise inventory refers to products a company owns and intends to sell.
-
Merchandise inventory may include the costs of freight in and making them ready for sale.
-
Merchandise inventory appears on the balance sheet of a service company.
Related questions
2. Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:
Sales are budgeted at $240,000 for November, $220,000 for December, and $210,000 for January.
Collections are expected to be 65% in the month of sale and 35% in the month following the sale.
The cost of goods sold is 70% of sales.
The company would like maintain ending merchandise inventories equal to 60% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $23,000.
Monthly depreciation is $14,000.
Ignore taxes.
| Balance Sheet October 31 | |
| Asset | |
| Cash | $22,200 |
| Accounts receivable | $72,200 |
| Merchandise inventory | $100,800 |
| Property, plant and equipment, net of $574,200 accumulated depreciation | $1,096,200 |
| Total asset | $1,291,400 |
| Liabilities and Stockholders' Equity | |
| Accounts payable | $256,200 |
| Common stock | $822,200 |
| Retain earnings | $213,000 |
| Total liabilities and stockholders' equity | $1,291,400 |
December cash disbursements for merchandise purchases would be:
Thanks!
