ch08 - 8-1Intermediate Accounting14th Edition8Valuation of...

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Unformatted text preview: 8-1Intermediate Accounting14th Edition8Valuation of Inventories:A Cost-Basis ApproachKieso, Weygandt, and Warfield8-21.Identify major classifications of inventory.2.Distinguish between perpetual and periodic inventory systems.3.Identify the effects of inventory errors on the financial statements.4.Understand the items to include as inventory cost.5.Describe and compare the cost flow assumptions used to account for inventories.6.Explain the significance and use of a LIFO reserve.7.Understand the effect of LIFO liquidations.8.Explain the dollar-value LIFO method.9.Identify the major advantages and disadvantages of LIFO.10.Understand why companies select given inventory methods.Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives8-3Inventories are:items held for sale, orgoods to be used in the production of goods to be sold.Inventory IssuesInventory IssuesInventory IssuesInventory IssuesLO 1 Identify major classifications of inventory.MerchandiserMerchandiserManufacturerManufacturerBusinesses with InventoryorClassification8-4One inventory account.Purchase goods in form ready for sale.Inventory IssuesInventory IssuesInventory IssuesInventory IssuesLO 1 Identify major classifications of inventory.Illustration 8-1Classification8-5Three accountsRaw materialsWork in processFinished goodsInventory IssuesInventory IssuesInventory IssuesInventory IssuesClassificationIllustration 8-1LO 1 Identify major classifications of inventory.8-6ClassificationInventory IssuesInventory IssuesInventory IssuesInventory IssuesIllustration 8-2LO 1 Identify major classifications of inventory.8-7Inventory Cost FlowInventory IssuesInventory IssuesInventory IssuesInventory IssuesIllustration 8-3Companies use one of two types of systems for maintaining inventory records perpetual systemor periodic system.LO 2 Distinguish between perpetual and periodic inventory systems.8-8Inventory Cost FlowInventory Cost FlowInventory Cost FlowInventory Cost FlowLO 2 Distinguish between perpetual and periodic inventory systems.Perpetual System 1.Purchases of merchandise are debited to Inventory.2.Freight-in is debited to Inventory. Purchase returns and allowances and purchase discounts are credited to Inventory.3.Cost of goods sold is debited and Inventory is credited for each sale.4.Subsidiary records show quantity and cost of each type of inventory on hand.The perpetual inventory system provides a continuous record of Inventory and Cost of Goods Sold.8-9Inventory Cost FlowInventory Cost FlowInventory Cost FlowInventory Cost FlowLO 2 Distinguish between perpetual and periodic inventory systems.Periodic System 1.Purchases of merchandise are debited to Purchases....
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This note was uploaded on 11/07/2011 for the course ACC 300 taught by Professor Lori during the Fall '10 term at Michigan State University.

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ch08 - 8-1Intermediate Accounting14th Edition8Valuation of...

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