Question

The accountant for the Lintz Sales Company is preparing the income statement for 2014 and the balance sheet at December 31, 2014. The January 1, 2014 merchandise inventory balance will appear

a. only as an asset on the balance sheet.
b. only in the cost of goods sold section of the income statement.
c. as a deduction in the cost of goods sold section of the income statement and as a current asset on the balance sheet.
d. as an addition in the cost of goods sold section of the income statement and as a current asset on the balance sheet.

Answer 1

The January 1, 2014 merchandise inventory balance will appear as an asset on the balance sheet.

Step-by-step explanation:

The January 1, 2014 merchandise inventory balance will appear as an asset on the balance sheet. The merchandise inventory is considered a current asset and is reported on the balance sheet at its original cost. It does not appear in the cost of goods sold section of the income statement because the cost of goods sold represents the cost of inventory that was sold during the year.