Question

Which of the following is inventory?

A. Raw materials and work in process
B. Equipment used to manufacture products which will be sold later
C. Office supplies that a company plans to use in the next few months
D. Goods held for sale in the normal course of business

Answer 1

Inventory includes raw materials, work in process, and goods held for sale in the normal course of business. Equipment used to manufacture products and office supplies are not considered inventory but rather capital goods and consumable goods, respectively.

Step-by-step explanation:

Inventory refers to the goods and materials that a business holds for the ultimate goal of resale. In the context of the question, inventory could include different categories:

• Raw materials and work in process (WIP), which constitute the components and partially finished goods that will eventually be finished goods to be sold.
• Equipment used to manufacture products is not considered inventory, but rather a capital good as it aids in the production process over time.
• Office supplies a company plans to use are not inventory but rather consumable goods used in the operations of a company.
• Goods held for sale in the normal course of business are inventory, as they are products ready for customers.

Therefore, the correct answer is both A and D: raw materials, work in process, and goods held for sale in the normal course of business.