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Week 3 - Ch 8 - CHAPTER 8 VALUATION OF INVENTORIES...

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C H A P T E R C H A P T E R 8 8 VALUATION OF INVENTORIES: VALUATION OF INVENTORIES: A COST-BASIS APPROACH A COST-BASIS APPROACH Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield
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Inventories are: items held for sale, or goods to beused in theproduction of goods to besold. Inventory Issues Inventory Issues Classification Merchandiser Merchandiser Manufacturer Manufacturer Businesses with Inventory: or
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Inventory Cost Flow Inventory Issues Inventory Issues Illustration 8-2 Illustration 8-2
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Inventory Cost Flow Inventory Issues Inventory Issues Illustration 8-3 Companies use oneof two types of systems for maintaining inventory records perpetual system or periodic system .
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Inventory Cost Flow Inventory Cost Flow Perpetual System 1. Purchases of merchandise are debited to Inventory. 2. Freight-in is debited to Inventory. Purchase returns and allowances and purchasediscounts are credited to Inventory. 3. Cost of goods sold is debited and Inventory is credited for each sale. 4. Subsidiary records show quantity and cost of each type of inventory on hand. Theperpetual inventory system provides a continuous record of Inventory and Cost of Goods Sold.
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Inventory Cost Flow Inventory Cost Flow Periodic System 1. Purchases of merchandisearedebited to Purchases. 2. Ending Inventory determined by physical count. 3. Calculation of Cost of Goods Sold: Beginning inventory $ 100,000 Purchases, net 800,000 Goods availablefor sale
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Inventory Control Inventory Issues Inventory Issues All companies need periodic verification of theinventory records by actual count, weight, or measurement, with thecounts compared with the detailed inventory records. Companies should takethe physical inventory near theend of their fiscal year, to properly report inventory quantities in their annual accounting reports.
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Basic Issues in Inventory Valuation Basic Issues in Inventory Valuation Valuation Companies must allocatethecost of all thegoods availablefor sale(or use) between thegoods that weresold or used and thosethat arestill on hand. Illustration 8-5 Illustration 8-5
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Basic Issues in Inventory Valuation Basic Issues in Inventory Valuation The physical goods (goods on hand, goods in transit, consigned goods, special sales agreements).
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