Chapter 7 & 8.docx - Chapter 7: Reporting and Interpreting...

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Chapter 7: Reporting and Interpreting Cost of Goods Sold and InventoryMotivations: Inventory ValuationComputers,+Inc.Mouse+Pad+InventoryDateUnits$/UnitTotalBeginning+Inventory1,000+++++5.25$+++5,250.00$++Purchases:J an.+3500++++++++5.30+++++2,650.00++++J une+20300++++++++5.60+++++1,680.00++++Sept.+15250++++++++5.80+++++1,450.00++++Nov.+29200++++++++5.90+++++1,180.00++++Goods+Available+for+Sale2,250+++++#########Ending+Inventory1,200+++++?Cost+of+Goods+Sold1,050+++++?Items Included in InventoryMerchandisersoMerchandise inventoryManufacturingoRaw materialsoWork in process oFinished goodsNature of Cost of Goods SoldBeginnning inventory + Purchases = Goods Available for SaleGoods Available for Sale – Ending inventory = Cost of goods sold
Inventory Valuation Methods1.Specific Identification = when units are sold, the SPECIFIC COST of the unit sold is added to cost of goods sold2.First-in, First-out = sell old inventory first a.Oldest Costs > Cost of Goods Soldb.Recent Costs > Ending Inventory3.Last-in, First-out = sell new inventory firsta.Oldest Costs > Ending Inventoryb.Recent Costs > Cost of Goods Sold4.Weighted AverageCost Flow Assumptions = the choice of an inventory costing method is not based on the physicalflow of goods on and off the shelvesFirst-in, First-outLast-in, First-out
Chapter 8: Reporting and Interpreting Property, Plant, and Equipment’ and IntangiblesMotivation: WorldCom’s CollapseProduction Capacity is usually determined by long-lived assetsExamples of long-lived assets:oTangible: plant, property and equipmentSubject to depreciationoIntangible: patent, copyright, goodwillSubject to amortization = depreciation for intangible assetsClassifying Long-lived Assets (aka fixed assets)1. Actively Used in Operations2. Expected to Benefit Future Periods3a. Tangible = Physical SubstanceLand Assets subject to depreciationoBuildings and equipmentoFurniture and fixturesNatural resource assets subject to depletionoMineral deposits and timber3b. Intangible = No Physical SubstanceDefinite life
oPatentsoCopyrightsoFranchisesIndefinite lifeoTrademarksoGoodwill

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Term
Spring
Professor
Sanjay
Tags
Depreciation, Generally Accepted Accounting Principles, Amortization of Intangible Assets, Acquisition and Development Cost

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