Chapter 5 - 6-11The Purchase and Sale of InventoryChapter

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Unformatted text preview: 6-11The Purchase and Sale of InventoryChapter 52InventoryAssets held for resale or for use in the production of goods for saleInventoryis tangible property that is held for resale or will be used in producing goods or services.6-23InventoryInventory is reported on the balance sheet as a current asset.Types of inventory:Merchandise inventoryRaw materials inventory These 3 willWork in process inventorybe studiedFinished goods inventory in managerial accounting.4Inventory Cost(A value reported in Balance Sheet)Include all costs incurred to bring the asset to useable or saleable condition, such as:1.Invoice price2.Taxes3.Freight charges (Delivery costs) 4.Inspection costs5.Preparation costs.6-35Shipping Terms(Sales & Purchases)F.O.B. (Free On Board) shipping point or destination tells who owns the goodsF.O.B. shippingpointindicates that the title to the goods is transferred from the Seller to Buyer at shipping. F.O.B. destinationindicates that the title to the goods is transferred from the Seller to Buyer at destination.6Whoever ownsthe goods while they are in-transitpays for the shipping.Shipping costs to get the inventory INare included as part of the cost of the inventory in B/S (Freight-in) paid by a buyer under FOB shipping point.Shipping costs for a sale are part of operating expenses in I/S (Freight-out) paid by a seller under FOB destination Shipping (Delivery) charges 6-47Example) 12/31 Physical count reveals an ending inventory balance of $220,000.- Additional information about in-transit inventories (all will be delivered next year)1) Shipped to a customer on 12/30, FOB destination, $10,000. Shipping costs $5002) Shipped to a customer on 12/29, FOB shipping point, $5,000. Shipping costs $2003) Purchased from a supplier on 12/29. FOB shipping point, $7,000. Shipping costs $300.As of 12/31, what is the amount of inventory that would be reported on B/S ?82/10, n/30 (for example)2% discount if invoice paid in ten days Read as “two-ten, net thirty”tells when and how much must be paidhigh interest cost ofnot taking purchase discountsTerms of Sale and Purchases6-593/10, n/30Percentage of Discount# of Days Discount Is AvailableOtherwise, the Full Amount Is Due # of Days when Full Amount Is DueDiscount offer10Recording Inventory Purchases and Freight CostsOn March 10, Paul’s Photo Center purchases 100 cameras that cost $125...
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This note was uploaded on 09/18/2010 for the course BUSS 152 taught by Professor Choiwooseok during the Fall '10 term at Korea University.

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Chapter 5 - 6-11The Purchase and Sale of InventoryChapter

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