If a cost is properly includable in merchandise inventory:

a. It remains on the Balance Sheet until the goods are sold.

b. It is reflected as an Operating Expense on the Income Statement when the goods are sold.

c. It will have no effect on Gross Profit when the goods are sold.

d. all of the above.

The correct option is a. it remains on the Balance Sheet until the goods are sold.

a. It remains on the Balance Sheet until the goods are sold.

The cost of ending inventory is recorded in the balance sheet. Hence the option is correct.

b. It is reflected as an Operating Expense on the Income Statement when the goods are sold.

COGS and operating expenses are discrete expenses. The cost that is not attributable to the COGS is usually goes into operating expenses. If the goods are sold the cost is categorized as cost of goods sold and recorded as separate line item on income statement rather than including in the operating expenses. Hence the option is incorrect.

c. It will have no effect on Gross Profit when the goods are sold.

The gross profit is derived by deducting COGS from sales revenue. So COGS have impact on gross profit. Hence the option is incorrect.

d. All of the above.

The cost of ending inventory is included in the balance sheet. Hence the option is incorrect.