chapter6 - CHAPTER 6 Inventories ACCT100 Autumn 2011 Teresa...

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Chapter 6-1 CHAPTER 6 Inventories ACCT100 Autumn 2011 Teresa Chu Chapter 6-2 Take physical inventory for 2 reasons: Perpetual System 1. Check accuracy of inventory records 2. Determine amount of inventory lost (wasted raw materials, shoplifting or employee theft) Periodic System 1. Determine inventory at balance sheet date 2. Determine COGS for the period Determining Inventory Quantities
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Chapter 6-3 2 steps: 1. Take a physical inventory Actually count, weigh or measure each kind of inventory on hand Take inventory when business is closed or slow 2. Determine ownership of goods INCLUDE: Goods in transits (FOB shipping point purchases and FOB destination sales), goods in warehouse and shops EXCLUDE: Consigned goods (goods of consignor and consignee sells them for a fee) Determining Inventory Quantities Chapter 6-4 Determining Inventory Quantities Merchandiser FOB shipping point purchases Merchandise inventory XX Cash XX Sale Supplier Customer Purchase FOB destination purchases NO Entry FOB destination sale Delivery expense XX Cash XX FOB shipping point sale NO Entry
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6-5 Total Costs = Unit cost x Quantity ??? Cannot apply if identical goods are purchased at different prices (COGS differs depend on which units are sold) Specific identification method: Accurately identify which units are sold and remained 3 cost flow assumptions: Assume cost flow unrelated to physical flow (1) First-in, first-out (FIFO) (2) Last-in, first-out (LIFO) (3) Average cost Cost Flow Methods in Periodic System Chapter 6-6 1. 1 item on Feb 2 for $10 2. 1 item on Feb 15 for $15 3. 1 item on Feb 25 for $20 Young & Crazy Company sells one item on Feb 18 for $90. What would be the balance of ending inventory and cost of goods sold for the month ended February, assuming the company used the Specific Identification
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This note was uploaded on 09/09/2011 for the course ACCT 100 taught by Professor T.chu during the Spring '11 term at University of Macau.

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chapter6 - CHAPTER 6 Inventories ACCT100 Autumn 2011 Teresa...

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