Final answer:
Merchandise that has been paid for but not taken by the customer should be counted as inventory because ownership has not yet transferred. The payment received creates a liability in the form of deferred income until delivery is completed. It is essential for accurate financial reporting to correctly account for such items in inventory.
Step-by-step explanation:
The question pertains to how to account for merchandise in inventory management when a customer has paid for goods, but has not yet taken possession of them. The correct answer from the provided options is (A) It should be counted as inventory. This is because ownership of the merchandise has not been transferred to the customer, so the goods must still be counted as part of the business's inventory. However, since payment has been received, this would also impact the accounting records by recognizing a liability, often referred to as unearned revenue or deferred income, because the service of delivering the goods is still outstanding.
An inventory count is an essential part of financial reporting and must reflect accurate information about assets held by a company. When merchandise is paid for but not yet delivered, this indicates that the control over the merchandise still lies with the company, and therefore it must be included in the inventory until the point of transfer of control to the customer.