the stocking cap store is a retailer of stocking caps. on 5 - 22, the company bought $6,000 of stocking caps…

the stocking cap store is a retailer of stocking caps. on 5 - 22, the company bought $6,000 of stocking caps for resale, paying in cash. (goods for resale are inventory.) 36. has a cost occurred? 37. has an expense occurred? why or why not?

the stocking cap store is a retailer of stocking caps. on 5 - 22, the company bought $6,000 of stocking caps for resale, paying in cash. (goods for resale are inventory.) 36. has a cost occurred? 37. has an expense occurred? why or why not?

Answer

Brief Explanations:

  1. When a company buys goods for resale (stocking caps in this case) and pays cash, a cost has occurred as inventory is acquired.
  2. An expense occurs when the inventory is sold or used up, not just when it is purchased. Since the inventory is just bought and not yet sold or consumed, no expense has occurred yet.

Answer:

  1. Yes
  2. No, Because the inventory is purchased but not yet sold or used up to recognize an expense.