Q5-22RQ - Horngren'S Financial And Managerial Accounting

Question

What financial statement is merchandise inventory reported on, and in what section?

Step-by-Step Solution

Answer

The merchandise inventory is reported in the current asset section of the balance sheet.

Meaning of Balance Sheet

A balance sheet refers to the report that represents the position of a business concern’s assets and liabilities on a particular date. As it reflects the entity's financial position, it is also known as a positional statement. 

Reporting of merchandise inventory on the financial statements

The merchandise inventory is reported on the balance sheet of a company. It is reported under the current asset section of the positional statement because the benefit of merchandise inventory is consumed by the business within one accounting period.

Whereas, the merchandise sold by the company is reported on the income statement’s cost of goods sold section.