Which of the following is/are not true regarding a merchandising firm?
A)Inventory appears on the merchandiser's balance sheet initially as an asset.
B)Inventory for a merchandiser is measured at acquisition cost.
C)When a sale takes place, the merchandising firm recognizes the cost of the inventory as an expense (cost of goods sold) on the income statement.
D)When a sale takes place, the merchandising firm recognizes the inventory reduction on the statement of cash flows.
E)All of the above are false regarding a merchandising firm.

Question

Quizplus · Accepted Answer

When a sale takes place, the merchandising firm recognizes the revenue from the sale on the income statement and the corresponding reduction in inventory, but this reduction in inventory does not appear on the statement of cash flows. Instead, the cost of goods sold is deducted from revenue to determine gross profit, which is then used to calculate the operating cash flows. Choices A, B, and C are true regarding a merchandising firm.

Which of the Following Is/are Not True Regarding a Merchandising