This preview has intentionally blurred sections. Sign up to view the full version.View Full Document
Unformatted text preview: P.271 Inventory and cost of goods sold When you buy the goods – inventory Buying inventory it is change one asset to another asset When you sell the goods – cost of goods sold deducted from your income statement Inventory Merchandise Company buys the completed product for resale – inventory account Manufactory Company makes the product did not lose any assets 1. Raw material – materials purchased for use in manufacturing products 2. Work in process – partially completed units in production 3. Finished goods - manufactured products ready for sale Inventory costs Raw material Work in process Finished goods Costs of goods sold Purchase price Direct Labor Freight, receiving, Indirect Manufactory overhead Storage costs costs of raw materials P.272 Who owns the inventory? Goods in transit FOD (free-on-board) Goods on consignment Exhibit 7.3 FOB destination (seller pays the shipping) Seller owns the goods in transit until the product arrives at the destination FOB origin (buyer pays the shipping) the ownership changes once it leaves the shipping point, buyer owns the goods in...
View Full Document
- Summer '11
- Income Statement, state withholding taxes