A merchandising business paid $2,500 to purchase inventory and $50 to have the inventory delivered to its customers. Its product costs were $2,550.
Answer the following statement true (T) or false (F)
False
The $2,500 paid to purchase inventory would be considered a midstream costs in a merchandising company and, as such, it would be classified as a product cost. Downstream costs are costs incurred after the manufacturing process including marketing, distribution, and customer services. Distribution costs, which include the product delivery costs of $50 in this situation, are classified as general, selling, and administrative expenses and are expensed in the period they are incurred.
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Answer the following statement true (T) or false (F)
An asset's book value is $18,200 on December 31, Year 5. The asset has been depreciated at an annual rate of $3200 on the straight-line method. Assuming the asset is sold on December 31, Year 5 for $15,200, the company should record:
A. Neither a gain nor a loss is recognized on this type of transaction. B. A loss on sale of $3,000. C. A gain on sale of $1800. D. A gain on sale of $3,000. E. A loss on sale of $1800.
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