Kieso_Inter_13e_Ch08

Kieso_Inter_13e_Ch08 - Chapter 8-1 C H A P T E R C H A P T...

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Unformatted text preview: Chapter 8-1 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 Chapter 8-2 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 Chapter 8-3 One inventory account Purchase goods ready for sale Classification Inventory Issues Inventory Issues Illustration 8-1 Illustration 8-1 Chapter 8-4 Classification Inventory Issues Inventory Issues Illustration 8-1 Illustration 8-1 Three accounts Raw materials Work in process Finished goods Chapter 8-5 Inventory Cost Flow Inventory Issues Inventory Issues Illustration 8-2 Illustration 8-2 Chapter 8-6 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 . Chapter 8-7 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. Chapter 8-8 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 Chapter 8-9 Inventory Cost Flow Inventory Cost Flow Illustration: Fesmire Company had the following transactions during the current year. Record these transactions using the Perpetual and Periodic systems. Chapter 8-10 Inventory Cost Flow Inventory Cost Flow Illustration 8-4 Illustration 8-4 Illustration: Solution on notes page Chapter 8-11 Inventory Cost Flow Inventory Cost Flow Illustration: Assume that at the end of the reporting period, the perpetual inventory account reported an inventory balance of $4,000. However, a physical count indicates inventory of $3,800 is actually on hand. The entry to record the necessary write-down is as follows. Inventory Over and Short 200 Inventory 200 Note: Inventory Over and Short adjusts Cost of Goods Sold. In practice, companies sometimes report Inventory Over and Short in the “Other revenues and gains” or “Other expenses and losses” section of the income statement. Chapter 8-12 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.detailed inventory records....
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This note was uploaded on 03/08/2011 for the course ACCT 3220 taught by Professor Hollie,dana during the Summer '08 term at Colorado.

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Kieso_Inter_13e_Ch08 - Chapter 8-1 C H A P T E R C H A P T...

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