Chapter 05

Chapter 05 - InventoryChapter #5 Chapter 5, Slide #1...

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Chapter 5, Slide #1 Inventory—Chapter #5
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Chapter 5, Slide #2 Inventory of Wholesalers and Retailers Purchased in finished form Resold without transformation It is always STUFF WE BOUGHT TO SELL LO1
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Chapter 5, Slide #3 Inventory is often the single largest asset account of many firms…
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Chapter 5, Slide #4 Inventory of Manufacturers Costs Included in Inventory Raw Materials Direct Labor Overhead (Indirect Costs)
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Chapter 5, Slide #5 Inventory of Manufacturers Manufacturing overhead Direct materials Direct labor Work in process Finished goods Raw materials Costs Included in Inventory Balance Sheet Classifications
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Chapter 5, Slide #6 Just to egg you on… (And that’s no yolk…)
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Chapter 5, Slide #7 Operating Cycle: Often called the “Cash To Cash”Cycle Cash Inventory Sales Accounts Receivable
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Chapter 5, Slide #8 Income Statement for a Merchandiser Net sales $100,000 Cost of goods sold 60,000 Gross profit $ 40,000 Selling and administrative expenses 29,300 Net income before tax $ 10,700 Income tax expense 4,280 Net income $ 6,420 Let’s Focus on the “Net” Part
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Chapter 5, Slide #9 “Net”=Sales minus these “Contra-Sales” Accounts Sales normal credit balance Sales Discounts Sales Allowances Sales Returns normal debit balance normal debit balance normal debit balance LO2
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Chapter 5, Slide #10 Credit Terms and Sales Discounts (more “account-o-babble”) “n/30” “1/10, n/30” “2/10, n/30” Payment due 30 days from invoice date Deduct 1% of invoice amount if paid within 10 days; otherwise full invoice amount is due in 30 days Deduct 2% of invoice amount if paid within 10 days; otherwise full invoice amount is due in 30 days
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Chapter 5, Slide #11 Purchases of merchandise Beginning inventory The Cost of Goods Sold Model Cost of goods sold Ending inventory LO3
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Chapter 5, Slide #12 An increase in ending inventory means more was bought than sold The Cost of Goods Sold Model Beginning inventory $ 15,000 + Cost of goods purchased 63,000 = Cost of goods available for sale 78,000 – Ending inventory (18,000 ) = Cost of goods sold $ 60,000 “Pool” of goods available to sell during the period
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Chapter 5, Slide #13 Periodic Inventory Systems Reduces record keeping but also decreases the ability to track theft, breakage, etc., and prepare interim financial statements Inventory records are updated periodically based on physical inventory counts
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Chapter 5, Slide #14 Perpetual Inventory Systems Point-of-sale terminals have improved the ability
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Chapter 05 - InventoryChapter #5 Chapter 5, Slide #1...

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