Which statement below correctly describes merchandise inventory?

To accurately answer which statement correctly describes merchandise inventory, we should first define what merchandise inventory is. Merchandise inventory refers to the goods that a company holds for the purpose of resale in the normal course of business. This includes all products that are purchased for resale and can be classified typically in one of the following categories:

1. Tangible Goods: Merchandise inventory includes tangible goods that are ready for sale.
2. Costs Associated: It encompasses all costs directly associated with acquiring the inventory, including purchase price, transportation costs, and relevant taxes.
3. Classification on Financial Statements: Merchandise inventory is classified as a current asset on the balance sheet, as it is expected to be sold within a year.
4. Impact on Financial Performance: Accurate tracking of merchandise inventory is crucial for proper financial reporting and affects the cost of goods sold (COGS) calculation.

By using these points, you can evaluate the statements provided regarding merchandise inventory and choose the one that accurately reflects these characteristics.