Question

What are the three characteristics of tangible personal property classified as inventory? What are some commonly used names for inventory found on a merchandiser’s or manufacturer’s balance sheet?

Answer 1

The three characteristics of tangible personal property classified as inventory are as follows:

1. Tangible personal property should be held for sale in the ordinary course of business. (finished goods inventory)
2. Tangible personal property currently underway or in process of production for such sale (work in process inventory)
3. Tangible personal property to be bought to work or to be currently consumed in the production of goods or services to be available for sale (raw materials inventory)

some commonly used names for inventory found on a merchandiser’s or manufacturer’s balance sheet are raw materials, work in process and finished goods inventory.