chap7 - goods sold. Do this so that normal margins can be...

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1 Acct 284 Chap. 7 CHAPTER 7 Reporting and Interpreting Cost of Goods Sold and Inventory
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2 Acct 284 Chap. 7 Inventory tangible property that is held for sale in the course of normal business or will be used in producing goods or services Merchandise inventory Raw materials inventory Work-in-process inventory Finished goods inventory
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3 Acct 284 Chap. 7 Inventories and COGS Merchandiser Merchandise Cost of Inventory Goods Sold Manufacturer RM. + DL & WIP FG Cost of Inv. OH Inv. Inv. Goods Sold - balance sheet account - income statement account
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4 Acct 284 Chap. 7 Cost of Goods Sold Equation COGS: Beginning Inventory + Purchases - Ending Inventory = Cost of Good Sold = COGAFS
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5 Acct 284 Chap. 7 Inventory Costing Methods FIFO (First-In, First-Out) LIFO (Last-In, First-Out) LIFO Conformity Rule
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6 Acct 284 Chap. 7 Lower of Cost or Market Inventory should be shown at the lower of cost or market May be applied to the entire inventory or to each item separately Write down the inventory and increase cost of
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Unformatted text preview: goods sold. Do this so that normal margins can be made when product is sold 7 Acct 284 Chap. 7 Cash Flow Effect of Inventories End Accts Payable = Beg. AP + Inventory - Cash paid to Purchases suppliers 8 Acct 284 Chap. 7 Inventory Errors Ending Inventory Overstated: Current Year: COGS Understated NI Overstated Next Year: COGS Overstated NI Understated Ending Inventory Understated: Current Year: COGS Overstated NI Understated Next Year: COGS Understated NI Overstated 9 Acct 284 Chap. 7 Perpetual vs. Periodic Inventory Item Perpetual Periodic Buy Inventory Increase Inventory Increase Purchases Sell inventory Increase COGS Reduce Inventory No entry Count Inventory Adjust balance to count Record inventory, close purchases and create cost of goods sold 10 Acct 284 Chap. 7 Ratio Analysis Inventory Turnover Ratio: ITO = Cost of Goods Sold Average Inventory...
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chap7 - goods sold. Do this so that normal margins can be...

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