inventory - INVENTORY I. Those assets that a company: A....

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INVENTORY I. Those assets that a company: A. Intends to sell in the normal course of business. B. Has in production (work in process) for future sale. C. Uses currently in the production of goods to be sold (raw materials). II. Types of Inventories A. Merchandise Inventory-Goods acquired for resale B. Manufacturing Inventory 1.Raw Materials 2.Work-in-Process 3.Finished Goods III. Inventory Cost Flows-beginning inventory + costs in- ending inventory =costs out IV. Inventory Methods A. Perpetual Inventory System-The inventory account is continuously updated as purchases and sales are made. B. Periodic Inventory System -The inventory account is adjusted at the end of a reporting cycle. V. What is Included in Inventory? A. General Rule-All goods owned by the company on the inventory date, regardless of their location. B. Goods in Transit C. Goods on Consignment VI. Expenditures Included in Inventory-all normal costs of acquisition and preparation for sale VII. Purchase Discounts A. Net Method B. Gross Method VIII. Inventory Cost Flow Methods A. Specific Cost Identification (5% +/-) 1. Items are added to inventory at cost when they are purchased. 2. COGS for each sale is based on the specific cost of the item sold.
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B. Average Cost Method-compute an average cost per unit (20%+/-) Weighted- average unit cost = Cost of goods available for sale ÷ Quantity available for sale C. First-In, First-Out (45-50% 1. The cost of the oldest inventory items are charged to COGS when goods are sold. 2. The cost of the newest inventory items remain in ending inventory. D. Last-In, First-Out (30-35%)
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This note was uploaded on 12/13/2010 for the course ACCT 112 taught by Professor King during the Spring '08 term at Howard County Community College.

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inventory - INVENTORY I. Those assets that a company: A....

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