INVENTORY-I-Chap008

INVENTORY-I-Chap008 - ACCOUNTI NG FOR INVENTORY: LCM3-STEP...

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

View Full Document Right Arrow Icon
8 - 1 ACCOUNTI NG FOR INVENTORY: LCM—3-STEP PROCESS - MEASURRING INVENTORY AT COST - MEASURING INVENTORY AT MARKET - CHOOSING THE LOWER
Background image of page 1

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

View Full DocumentRight Arrow Icon
8 - 2 Recording and Measuring Inventory Recording and Measuring Inventory Merchandise Inventory Goods acquired for resale Manufacturing Inventory Raw Materials Work-in-Process Finished Goods Types of Inventory
Background image of page 2
8 - 3 Manufacturing Inventories Manufacturing Inventories Raw Materials Work in Process Finished Goods Cost of Goods Sold Direct Labor Manufacturing Overhead $XX $XX $XX Raw materials purchased Direct labor incurred Manufacturing overhead incurred Raw materials used Direct labor applied Manufacturing overhead applied Work in process transferred to finished goods Finished goods sold
Background image of page 3

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

View Full DocumentRight Arrow Icon
8 - 4 Inventory Systems Inventory Systems Perpetual Inventory System The inventory account is continuously updated as purchases and sales are made. Periodic Inventory System The inventory The inventory account is adjusted account is adjusted at the end of a at the end of a reporting cycle. reporting cycle. Two accounting systems are used to record transactions involving inventory:
Background image of page 4
8 - 5 Perpetual Inventory System Perpetual Inventory System Lothridge Wholesale Beverage Company (LWBC) begins 2011 with $120,000 in inventory. During the period it purchases on account $600,000 of merchandise for resale to customers. Returns of inventory are credited to the inventory account. Discounts on inventory purchases can be recorded using the gross or net method. 2011 Inventory 600,000 Accounts payable 600,000 Purchase of merchandise inventory on account
Background image of page 5

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

View Full DocumentRight Arrow Icon
8 - 6 Perpetual Inventory System During 2011, LWBC sold, on account, inventory with a retail price of $820,000 and a cost basis of $540,000, to customers. 2011 Inventory 600,000 Accounts payable 600,000 Purchase of merchandise inventory on account. 2011 Accounts receivable 820,000 Sales revenue 820,000 Record sales on account. Cost of goods sold 540,000 Inventory 540,000 Record cost of goods sold.
Background image of page 6
8 - 7 Periodic Inventory System Beginning Inventory + Net Purchases Cost of Goods Available for Sale - Ending Inventory = Cost of Goods Sold The periodic inventory system is not designed to track either the quantity or cost of merchandise inventory. Cost of goods sold is calculated, using the schedule below, after the physical inventory count at the end of the period.
Background image of page 7

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

View Full DocumentRight Arrow Icon
8 - 8 Periodic Inventory System Lothridge Wholesale Beverage Company (LWBC) begins 2011 with $120,000 in inventory. During the period it purchases on account $600,000 of merchandise for resale to customers. 2011 Purchases 600,000 Accounts payable 600,000 Purchase of merchandise inventory on account
Background image of page 8
8 - 9 Periodic Inventory System No entry is made to record Cost of Goods Sold. A physical count of Ending Inventory shows a balance of $180,000. Let’s calculate Cost of Goods Sold at the end of 2011.
Background image of page 9

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

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 56

INVENTORY-I-Chap008 - ACCOUNTI NG FOR INVENTORY: LCM3-STEP...

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