Which items are components of a completed inventory?

• A. Raw materials. Work in process. Finished goods. Merchandise.
• B. Cash, accounts receivable, inventories, and payables.
• C. Land, buildings, equipment, and depreciation.
• D. Sales, expenses, and net income.

Answer: (A)

Inventory covers items a company holds for sale or for use in making products. In manufacturing, that means raw materials, work in progress, and finished goods. In merchandising, it’s merchandise held for resale. A complete inventory, then, includes raw materials, work in process, finished goods, and merchandise. The other options mix items that aren’t inventory—cash, accounts receivable, and payables are current assets or liabilities; land, buildings, and equipment are long-term assets; depreciation relates to asset value; and sales, expenses, and net income are income statement items.