Lecture13 2010.10.27 PostClass

Lecture13 2010.10.27 PostClass - Lecture 13 Inventory...

Info iconThis preview shows pages 1–15. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture 13 Inventory Accounting for Snap-On Tools
Background image of page 1

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

View Full DocumentRight Arrow Icon
2 Key Issues in Inventory Accounting 1) How should the inventory be valued at acquisition? 2) How should the cost of goods sold (used) be determined? – How should the inventory be valued subsequent to acquisition? 3) What happens if inventory loses value? 4) What costs are included in inventory? Today’s Class Lecture 12
Background image of page 2
Goals of Today’s Class • Recap of Inventory Accounting – Practice Problem • Lower of Cost or Market Principle • What costs are to be included as inventory? • Case Study: Snap-On Tools
Background image of page 3

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

View Full DocumentRight Arrow Icon
Announcements • Exam 1 Re-grade request deadline: TODAY @ 4:30pm • Exam 2 notification of conflict deadline: FRIDAY (10/29) • Practice Exam #2 is on webCafe • Upcoming events – HW #2: 9am on 11/7, (extended from 11/5) – Exam #2: 6-8pm on 11/8
Background image of page 4
RECAP
Background image of page 5

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

View Full DocumentRight Arrow Icon
Cost of Beginning Inventory + Cost of Acquisitions = Cost of Ending Inventory + Cost of Goods Sold/Used Since historical cost is used as the basis for valuing inventories, then identical goods purchased at different times may have different values associated with them. Cost of Goods Available for Sale
Background image of page 6
Inventory T-Account Inventory Cost of Acquisitions Cost of Beginning Inventory Cost of Goods Sold / Used Cost of Ending Inventory Cost of goods available for sale While, in general, the quantity of goods sold and the quantity of goods held in the ending inventory are known, the cost of goods sold and the cost of the ending inventory must be determined
Background image of page 7

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

View Full DocumentRight Arrow Icon
Allocating Cost of Goods Available for Sale
Background image of page 8
Questions: How is the cost of goods sold to be determined? How is the cost of the goods remaining after the sale to be determined? Methods for inventory valuation: 1. First-in, first-out (FIFO) 2. Last-in, first-out (LIFO) 3. Weighted average
Background image of page 9

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

View Full DocumentRight Arrow Icon
Alternative Cost Flow Assumptions
Background image of page 10
FIFO • The cost of goods sold is derived using relatively older costs . • The inventory costs are those which were incurred later in the period and, therefore, are more current relative to the end of the period (the date of the financial reports). • This is the most common method in the U.S.
Background image of page 11

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

View Full DocumentRight Arrow Icon
LIFO • The cost of goods sold is derived using relatively newer costs . • The inventory costs are those which were incurred earlier in the period and, therefore, are “stale” relative to the end of the period (the date of the financial reports). • LIFO can be used for tax purposes if and only if LIFO is used for financial reporting purposes
Background image of page 12
• COGS is calculated using a weighted average of prior inventory costs. • It is a combination of FIFO and LIFO • After FIFO this is the next most common inventory valuation method in the US. Weighted Average Cost Flow Assumption
Background image of page 13

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

View Full DocumentRight Arrow Icon
Practice • 1. Compute the units in ending inventory. Beginning Inventory:
Background image of page 14
Image of page 15
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 03/02/2011 for the course ACCT 101 taught by Professor Armstrong during the Fall '09 term at UPenn.

Page1 / 41

Lecture13 2010.10.27 PostClass - Lecture 13 Inventory...

This preview shows document pages 1 - 15. Sign up to view the full document.

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