Chap5MAF3e

Chap5MAF3e - Financial and Managerial Accounting...

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Unformatted text preview: Financial and Managerial Accounting Inventories & Cost of Sales McGraw-Hill/Irwin Determining Inventory Items Merchandise inventory includes all goods that a company owns and holds for sale, regardless of where the goods are located when inventory is counted. Items requiring special attention include: Goods in Transit Goods Damaged or Obsolete Goods on Consignment 5-2 FOB Destination Point Public Carrier Seller Buyer Goods in Transit Public Carrier Seller Buyer FOB Shipping Point Ownership passes to the buyer here. 5-3 Determining Inventory Costs Invoice Cost Include all expenditures necessary to bring an item to a salable condition and location. Minus Discounts and Allowances Plus Import Duties Plus Freight Plus Storage Plus Insurance 5-4 Internal Controls and Taking a Physical Count Most companies take a physical count of inventory at least once each year. When the physical count does not match the Merchandise Inventory account, an adjustment must be made. I n v e n t o r y C o u n t T a g C o u n t e d b y _ _ _ _ _ _ _ Q u a n t i t y C o u n t e d _ _ _ 5-5 Inventory Costing Under a Perpetual System Accounting for inventory requires several decisions . . . Costing Method Specific Identification, FIFO, LIFO, or Weighted Average Inventory System Perpetual or Periodic 5-6 Frequency in Use of Inventory Methods 5-7 Inventory Cost Flow Assumptions First-In, First-Out (FIFO) Assumes costs flow in the order incurred. Last-In, First-Out (LIFO) Assumes costs flow in the reverse order incurred. Weighted Average Assumes costs flow at an average of the costs available. 5-8 Inventory Costing Illustration 5-9 Specific Identification The above purchases were made in August. On August 14, a company sold eight bikes originally costing $91 and 12 bikes originally costing $106. 5-10 The Cost of Goods Sold for the 20 bikes old on the August 14 sale is $2,000. 8 bikes @ 91 = $ 728 12 bikes @ 106 = $1,272 After this sale, there are five units in inventory at $500: 2 bikes @ $91 = $ 182 3 bikes @ $106 = $ 318 Specific Identification 5-11 Additional purchases were made on August 17 and 28. The cost of the 23 items sold on August 31 were as follows: 2 @ $91 3 @ $106 15 @ $115 3 @ $119 Specific Identification 5-12 Specific Identification Cost of Goods Sold for August 31 = $2,582 5-13 Specific Identification Aug. 3 Merchandise inventory 1,590 Accounts payable 1,590 Aug. 14 Accounts receivable 2,600 Sales...
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This note was uploaded on 10/13/2009 for the course ACC 201 taught by Professor Fielder during the Fall '08 term at Syracuse.

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Chap5MAF3e - Financial and Managerial Accounting...

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