Chapter_6_student

Chapter_6_student - 6-1REPORTING AND ANALYZING...

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Unformatted text preview: 6-1REPORTING AND ANALYZING INVENTORYFinancial Accounting, Sixth Edition66-2Classifying InventoryOne Classification:uMerchandise InventoryThree Classifications:uRaw MaterialsuWork in ProcessuFinished GoodsMerchandising CompanyManufacturing CompanyRegardless of the classification, companies report all inventories under Current Assets on the balance sheet.6-3Physical Inventory taken for two reasons:Perpetual System1.Check accuracy of inventory records.2.Determine amount of inventory lost (wasted raw materials, shoplifting, or employee theft).Periodic System3.Determine the inventory on hand4.Determine the cost of goods sold for the period.Determining Inventory QuantitiesSO 1 Describe the steps in determining inventory quantities.6-4Involves counting, weighing, or measuring each kind of inventory on hand.Taken,uwhen the business is closed or business is slow.uat end of the accounting period.Taking a Physical Inventory Determining Inventory QuantitiesSO 1 Describe the steps in determining inventory quantities.6-5Goods in TransituPurchased goods not yet received.uSold goods not yet delivered.Determining Ownership of GoodsDetermining Inventory QuantitiesSO 1 Describe the steps in determining inventory quantities.Goods in transit should be included in the inventory of the company that has legal titleto the goods. Legal title is determined by the terms of sale.6-6Illustration 6-1 Terms of saleOwnership of the goods passes to the buyer when the public carrier accepts the goods from the seller.Ownership of the goods remains with the seller until the goods reach the buyer....
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Chapter_6_student - 6-1REPORTING AND ANALYZING...

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