accting 301 ch6 min shen - CH 6-Inventory Cost of Good Sold...

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Example: On May 10, We Fix It Company received merchandise for resale from its supplier. The invoice price was $2,500 with terms of 2/10, n/30 for 100 units of Part #107N. The invoice was paid on May 17. Freight costs were $80 and the company paid $56 of interest on a loan to buy the inventory. What is the unit cost that should be recorded for eachof the 100 units of Part # 107N?
2 Example: Matrix, Inc. purchased on account $6,000 of merchandise for resale to customers on 3/10/2010. The merchandise was purchased subject to a cash discount of 2/10, n/30. The company incurred $160 in freight-in on the merchandise. Upon inspection, the company found that $200 of merchandise was damaged and the seller agreed to accept the merchandise return and credit the account of the company on 3/15/2010. Lower of cost or market (LCM) – GAAP requires that inventories be carried at cost or current market value, whichever is lower. In conformity with the cost principle, inventories should be measured at their purchase cost. But if there is a permanent decline in the market value of the inventories (damaged, obsolete, etc), we need to write the inventory down. Example: Item Historical Cost Designated Market Value Final Inventory Cost A $88,000 $80,000 B $88,000 $90,000 Cost, physical flow relatedto goods: Merchandise is purchasedMerchandise is held for saleMerchandise is sold Ending inventory on the balance sheet Cost of goods sold on income statement Inventory Cost of good sold

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