Understanding Merchandise Inventory: Definition, Role, and

Your Answer Which statement below correctly explains what merchandise inventory is? Merchandise inventory is subtracted from net sales on the income statement to determine gross profit for the period. Merchandise inventory is an expense account reported on the income statement and contains the cost of products purchased for sale. Merchandise inventory is increased when products are sold to customers. Merchandise inventory is an asset reported on the balance sheet and contains the cost of products purchased for sale. Correct Answer Merchandise inventory is an asset reported on the balance sheet and contains the cost of products purchased for sale.