ch06 - Chapter 6-1 CHAPTER CHAPTER 6 6 Inventories...

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Unformatted text preview: Chapter 6-1 CHAPTER CHAPTER 6 6 Inventories Financial Accounting, Sixth Edition Chapter 6-2 1. Describe the steps in determining inventory quantities. 2. Explain the accounting for inventories and apply the inventory cost flow methods. 3. Explain the financial effects of the inventory cost flow assumptions. 4. Explain the lower-of-cost-or-market basis of accounting for inventories. 5. Indicate the effects of inventory errors on the financial statements. 6. Compute and interpret the inventory turnover ratio. Study Objectives Study Objectives Chapter 6-3 Reporting and Analyzing Inventory Taking a physical inventory Determining ownership of goods Classifying Inventory Determining Inventory Quantities Inventory Costing Inventory Errors Statement Presentation and Analysis Merchandising inventory Manufacturing inventory Specific identification Cost flow assumptions Financial statement and tax effects Consistent use Lower-of- cost-or- market Income statement effects Balance sheet effects Presentation Analysis Chapter 6-4 Multiple-Step Income Statement Multiple-Step Income Statement SO 1 Describe the steps in determining inventory quantities. SO 1 Describe the steps in determining inventory quantities. Chapter 6-5 Inventory systems: Perpetual System In a perpetual inventory system, companies keep detailed records of the cost of each inventory purchase and sale. These records continuously-perpetually-show the inventory that should be on hand for every item. Periodic System In a periodic inventory system, companies do not keep detailed inventory records of the goods on hand throughout the period. Instead, they determine the cost of goods sold only at the end of the accounting period that is, periodically. Determining Inventory Quantities Determining Inventory Quantities SO 1 Describe the steps in determining inventory quantities. SO 1 Describe the steps in determining inventory quantities. Chapter 6-6 Classifying Inventory Classifying Inventory One Classification: Merchandise Inventory Three Classifications: Raw Materials Work in Process Finished Goods Merchandising Company Manufacturing Company Regardless of the classification, companies report all inventories under Current Assets on the balance sheet. Chapter 6-7 Involves counting, weighing, or measuring each kind of inventory on hand. Taken, when the business is closed or when business is slow. at end of the accounting period. Taking a Physical Inventory Taking a Physical Inventory Determining Inventory Quantities Determining Inventory Quantities SO 1 Describe the steps in determining inventory quantities. SO 1 Describe the steps in determining inventory quantities. Chapter 6-8 Physical Inventory taken for two reasons: Perpetual System 1. Check accuracy of inventory records....
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ch06 - Chapter 6-1 CHAPTER CHAPTER 6 6 Inventories...

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