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ch 9 Inventory - Ch9Inventoryand CostofGoodsSold...

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9-1 Ch 9 Inventory and  Cost of Goods Sold Learning Objectives 1. Define inventory for a merchandising business, and identify the  different types of inventory for a manufacturing business. 2. Explain the periodic and perpetual inventory systems. 3. Use the four basic inventory valuation methods: specific  identification, average cost, FIFO, and LIFO. 4. Choose an inventory valuation method based on the trade-offs  among income tax effects and the impact on the financial  statements. (continues)
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9-2 Learning Objectives 1. Apply the lower-of-cost-or-market (LCM) rule to reflect  declines in the market value of inventory. 2. Use the gross profit method to estimate ending inventory. 3. Determine the financial statement impact of inventory  recording errors.   4. Analyze inventory using financial ratios, and properly  compare ratios of different firms after adjusting for  differences in inventory valuation methods. 5. Compute estimates at FIFO, LIFO, average cost, and  lower-of-cost-or-market inventory using the retail  inventory method.
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9-3 Define inventory for a merchandising business and identify the different types of inventory for a manufacturing business. OBJECTIVE 1
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9-4 What Is Inventory? Inventory  designates goods held for sale in the  normal course of business or, for a manufacturer, also  includes goods in production. For a manufacturing firm, a broad array of production  costs is included as part of the cost of inventory.   The terms  raw materials work in process , and  finished goods  refer to the inventories of a  manufacturing enterprise.
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9-5 Manufacturing Business Work in Process   (WIP)  consists of materials partly  processed and requiring further work before they can  be sold. Work in Process includes three cost elements: 1. Direct materials  refers the cost of materials directly identified  with goods in production. 2. Direct labor  refers to the cost of labor directly identified with  goods in production.
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