inventory - Click to edit Master subtitle style Retail...

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Unformatted text preview: Click to edit Master subtitle style Retail Inventory Dr. James Gong Agenda n Periodic inventory systems n FIFO and LIFO n In-class practice problem n FIFO vs. LIFO comparison n LIFO reserve n Dollar value LIFO n In class practice problem n Perpetual inventory systems Physical Flow vs. Money Flow Companies purchase, manufacture, and sell constantly. n How do companies deal with the cost flows? n Periodic and perpetual inventory systems Periodic Inventory System Inventory balances at beginning of year is last years ending balance. When goods are bought you use the purchases account to record them. When inventory is sold you record the event (revenue and AR). You count the inventory and update it at the year end. Cost of goods sold is only recorded at year end. You calculate the cost of goods sold as in cost flow (4). To buy : Purchases XX A/P XX ** Assumes the gross approach is taken To return: A/P XX Purchase Returns and Allowances XX Periodic Inventory System To sell: A/R XX Year end adjusting entries: CGS XX Beginning inventory XX CGS XX Purchase XX Ending inventory XX CGS XX Periodic Inventory System Periodic Inventory System Inventory is not up to date. Cost of goods sold depends on the assumption of the order in which product costs enter into inventory and the order in which inventory is sold. Cost flow assumptions: How dollars are assigned to goods as they are sold. Methods: n First-in, First-out (FIFO) n Last-in, First-out (LIFO) n Specific identification Periodic Inventory Systems O bj1 0...
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This note was uploaded on 09/25/2010 for the course ACCY 302 taught by Professor Chen during the Fall '09 term at University of Illinois at Urbana–Champaign.

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inventory - Click to edit Master subtitle style Retail...

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