Week 3 - Ch 8

Week 3 - Ch 8 - C H A P T E R C H A P T E R 8 8 VALUATION...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 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 Inventories are: items held for sale, or goods to be used in the production of goods to be sold. Inventory Issues Inventory Issues Classification Merchandiser Merchandiser Manufacturer Manufacturer Businesses with Inventory: or Inventory Cost Flow Inventory Issues Inventory Issues Illustration 8-2 Illustration 8-2 Inventory Cost Flow Inventory Issues Inventory Issues Illustration 8-3 Illustration 8-3 Companies use one of two types of systems for maintaining inventory records perpetual system or periodic system . 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 purchase discounts 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. The perpetual inventory system provides a continuous record of Inventory and Cost of Goods Sold. Inventory Cost Flow Inventory Cost Flow Periodic System 1. Purchases of merchandise are debited 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 available for sale Inventory Control Inventory Issues Inventory Issues All companies need periodic verification of the inventory records by actual count, weight, or measurement, with the counts compared with the detailed inventory records. Companies should take the physical inventory near the end of their fiscal year, to properly report inventory quantities in their annual accounting reports. Basic Issues in Inventory Valuation Basic Issues in Inventory Valuation Valuation Companies must allocate the cost of all the goods available for sale (or use) between the goods that were sold or used and those that are still on hand. Illustration 8-5 Illustration 8-5 Basic Issues in Inventory Valuation Basic Issues in Inventory Valuation The physical goods (goods on hand, goods in transit, consigned goods, special sales agreements). The costs to include (product vs. period costs). The cost flow assumption (FIFO, LIFO, Average cost, Specific Identification, Retail, etc.)....
View Full Document

Page1 / 31

Week 3 - Ch 8 - C H A P T E R C H A P T E R 8 8 VALUATION...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online