How should the following costs affect a retailer's inventory?
You Answered Correctly!
Freight-in Increase
Interest on inventory loan No effect
All costs necessary to prepare inventory for sale are capitalized to inventory. Freight-in is such a cost. The goods must be shipped to the seller's location before they can be sold. Interest on inventory loans is a financing cost. It does not contribute to the process of making the inventory ready for sale.
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