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3.19(1st day after test 2)

3.19(1st day after test 2) - Today's Topic Financial...

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Today’s Topic PLEASE TURN OFF CELL PHONES Financial Accounting Information System This class will describe GAAP for: Balance Sheet: Inventory Income Statement: Cost of Goods Sold, Period Expenses Statement of Cash Flow effect
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Fig 159 What is inventory? Inventory is goods purchases for resale. Service companies (banks, insurance, repair, consultants) have little or no inventory Merchandising companies (wholesale & retail stores) generate revenue by buying & selling merchandise inventory Manufacturing companies have inventory in various phases of production WE WILL STUDY MERCHANDISING
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Fig 160 Why is inventory cost important? For Merchandising Company: Sales Revenue - Cost of Goods Sold Gross Margin Gross margin (or Gross Profit) is THE measure of success! Inventory is the key to computing Cost of Goods Sold!
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Fig 161 What is the cost of inventory? Four topics to learn: 1. Identify product cost 2. Compute cost of goods available for sale 3. Allocate cost of goods available for sale between inventory and cost of goods sold 4. Other topics
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Fig 162 Product Costs v Period Costs Product  Costs Costs included in  inventory.  (price of  goods purchased,  shipping and handling,  transit insurance) Period Costs Costs not included in  inventory, such as Selling &  Administrative Costs  (salaries, commissions,  advertising, etc.)
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Fig 163 Compute Cost of Goods Available for Sale Beginning Inventory Balance + Inventory Purchased During the Period = Cost of Goods Available for Sale
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Fig 164 Allocate Cost of Goods Available for Sale Cost of Goods 
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