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

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Unformatted text preview: Chapter 6-1 CHAPTER CHAPTER 6 6 Inventories ACCT 2111– Introductory Financial Accounting Chapter 6-2 Classifying Inventory Classifying Inventory One Classification: Merchandise Inventory Three Classifications: Raw Materials Work in Process Finished Goods Merchandising Company Manufacturing Company Regardless of the classification, companies report all inventories under Current Assets on the balance sheet. Chapter 6-3 Physical Inventory taken for two reasons: Perpetual System 1. Check accuracy of inventory records. 2. Determine amount of inventory lost (wasted raw materials, shoplifting, or employee theft). Periodic System 1. Determine the inventory on hand 2. Determine the cost of goods sold for the period. Determining Inventory Quantities Determining Inventory Quantities 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 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 the inventory of the company that has legal title to the goods. Legal title is determined by the terms of sale . Chapter 6-6 Determining Inventory Quantities Determining Inventory Quantities Illustration 6-1 Ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller. Ownership of the goods remains with the seller until the goods reach the buyer. Terms of Sale Terms of Sale 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 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 Chapter 6-9 D&D Company makes the following 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 one item on 2/28/07 for $90. What would be the balance of (1) ending inventory and (2) cost of goods sold for the month ended Feb. 2007, assuming the company used the Specific Identification method to cost inventories? Assume a tax rate of 30%. Example Inventory Costing Inventory Costing 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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This note was uploaded on 11/07/2010 for the course BBA 1023 taught by Professor Dkwidkdksiw during the Spring '10 term at City University of Hong Kong.

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

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