ch06 WebCT - CHAPTER 6 CHAPTER Inventories Chapter 6-1 ACCT...

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Chapter 6-1 CHAPTER CHAPTER 6 6 Inventories ACCT 2111– Introductory Financial Accounting
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Chapter 6-2 Classifying Inventory Classifying Inventory One Classification: MerchandiseInventory Three Classifications: Raw Materials Work in Process Finished Goods Merchandising Company Manufacturing Company Regardless of theclassification, companies report all inventories under Current Assets on thebalancesheet.
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Chapter 6-3 Physical Inventory taken for two reasons: Perpetual System 1. Check accuracy of inventory records. 2. Determineamount of inventory lost (wasted raw materials, shoplifting, or employee theft). Periodic System 1. Determinetheinventory on hand 2. Determinethecost of goods sold for theperiod. Determining Inventory Quantities Determining Inventory Quantities
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Chapter 6-4 Involves counting, weighing, or measuring each kind of inventory on hand. Taken, when the business is closed or when business is slow. at end of the accounting period. Taking a Physical Inventory Taking a Physical Inventory Determining Inventory Quantities Determining Inventory Quantities
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Chapter 6-5 Goods in Transit Purchased goods not yet received. Sold goods not yet delivered. Determining Ownership of Goods Determining Ownership of Goods Determining Inventory Quantities Determining Inventory Quantities Goods in transit should be included in theinventory of thecompany that has legal title to thegoods. Legal titleis determined by the terms of sale .
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Chapter 6-6 Determining Inventory Quantities Determining Inventory Quantities Illustration 6-1 Ownership of thegoods passes to the buyer when thepublic carrier accepts thegoods fromtheseller. Ownership of thegoods remains with the seller until thegoods reach thebuyer. Terms of Sale Terms of Sale
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Chapter 6-7 Consigned Goods Goods held for sale by one party although ownership of the goods is retained by another party. Determining Ownership of Goods Determining Ownership of Goods Determining Inventory Quantities Determining Inventory Quantities
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Chapter 6-8 Unit costs can be applied to quantities on hand using the following costing methods: Specific Identification First-in, first-out (FIFO) Last-in, first-out (LIFO) Average-cost Inventory Costing Inventory Costing Cost Flow Assumptions
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Chapter 6-9 D&D Company makes thefollowing purchases: 1. One item on 2/2/07 for $10 2. One item on 2/15/07 for $15 3. One item on 2/25/07 for $20 D&D Company sells oneitem on 2/28/07 for $90. What would bethebalance of (1) ending inventory and (2) cost of goods sold for themonth ended Feb. 2007, assuming thecompany used the Specific Identification method to cost inventories? Assumea tax rateof 30%. Example Inventory Costing Inventory Costing
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Chapter 6-10 Purchase on 2/2/07 for $10 Purchase on 2/15/07 for $15 Purchase on 2/25/07 for $20 Inventory Balance = $ 45 D&D Company Income Statement For the Month of Feb. 2007 Sales $ 90 Cost of goods sold ?
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