Lecture14_invty_Blackboard

Lecture14_invty_Blackboard - Inventories Appreciate why...

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Inventories Appreciate why inventory measurement is so important. Examine reporting effects of measurement options. Understand the distinction between FIFO, LIFO and Average Costing methods. Does inventory measurement impact earnings?
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Performance Comparisons Aerospatial Net income = $60m Boeing Net income = $50m
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Performance Comparisons Ferragamo Net income = $30m Nine West Net income = $35m
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Inventories = items of personal property held for resale or used in the production of other goods Merchandiser Inventories = completely manufactured goods acquired through purchase and held for resale Valuation: Cost = original purchase price & all other costs incurred to get goods ready for sale
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Manufacturer Finished goods = completely manufactured goods ready for sale Goods in Process = partially completed goods Raw materials = basic resources used in fabricating a product Valuation: Production cost = Direct materials XX Direct labor XX Overhead XX XX
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a. 2004 2005 Sales 100,000 110,000 Cost of good sold: Beg. Inventory $ 0 $10,000 + Purchases 70,000 58,000 - Cost of goods 70,000 68,000 available for sale - End. Inventory 10,000 0 - Cost of goods sold 60,000 68,000 Gross margin $40,000 42,000 Operating expenses 36,000 36,500 Net income $ 4,000 5,500
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b. 2004 2005 Sales 100,000 110,000 Cost of good sold: Beg. Inventory $ 0 $11,000 + Purchases 70,000 58,000 - Cost of goods 70,000 69,000 available - End. Inventory 11,000 0 - Cost of goods sold 59,000 69,000 Gross margin $41,000 41,000 Operating expenses 36,000 36,500 Net income $5,000 4,500
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Objectives Properly measure income by matching cost of goods sold with related revenue Properly measure financial position by properly measuring EI
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To measure CofG/S Beginning inventory (BI) Purchases (P) Ending inventory (EI)
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Inventory tracking systems Perpetual system Periodic system
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Perpetual Inventory System: Under this system, a running record is kept of: 1. Units and costs of items purchased 2. Units and costs of items sold 3. Units and costs of items on hand
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Purchases Sales Balance on hand
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This note was uploaded on 05/24/2008 for the course ACC 203 taught by Professor Choi during the Spring '08 term at NYU.

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Lecture14_invty_Blackboard - Inventories Appreciate why...

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