Reference no: EM132804992

Question -

Q1. How is the inventory in a merchandising business different from the inventory in a manufacturing business?

A. In a merchandising business, there is no work-in process inventory.

B. In a manufacturing business, there is just one category of inventory, in a merchandising business, there are three categories of inventory

C. In a merchandising business, there is just one category of inventory; in a manufacturing business, there are three categories of inventory.

D. In a merchandising business, final inventory cost includes materials, labor, and overhead; in a manufacturing business, final inventory cost includes only the original purchase cost of the inventory.

Q2. On November 1, a company purchased inventory costing $1,000 on account. The payment terms are 2/10, n30. The company paid on November 6 to receive the 2% discount. What is the impact on the company's financial statements of the cash payment of this account within the discount period?

A. Decrease inventory by $1,000

B. Increase liabilities by $1,200

C. Increase inventory by $20

D. Decrease cash by $980