Give the meaning of ‘Merchandise Inventory’, and indicate the costs included in Merchandise Inventory account.
Explanation of Solution
Definition of Merchandise Inventory: Merchandise is the stock of goods bought by a wholesaler, or a retailer, or a trader, to be sold within a year. Merchandise Inventory is a current asset account which includes all the costs incurred to acquire merchandise, and process it further for sale.
Costs included in Merchandise Inventory account: The following costs are included in Merchandise Inventory account:
- Price of goods
- Shipping costs
- Transit insurance cost
- Storage costs
- Packaging costs
These inventory costs are also referred to as product costs because they are related to the product (goods or stock).
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