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Chapter 6 Lectur - Chapter 6 Reporting and Analyzing Inventory The focus of Chapter 6 is merchandise inventory Inventory resulting from

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Chapter 6: Reporting and Analyzing Inventory The focus of Chapter 6 is merchandise inventory. Inventory resulting from manufacturing and how to cost that inventory is a topic of the Managerial Accounting course. In the way of background, the authors discuss the need of physical inventory counts. Whether a company uses a perpetual or periodic inventory system, inventory must be counted from time to time. There are several reasons for this. Inventory is an asset, and companies need to report the correct amount of assets and cost of goods sold in their financial statements. Of course, in a periodic system a physical inventory count allows a company to back into the correct numbers. In a perpetual system, we should theoretically know both from the accounting records. However, actual inventory value can vary from the inventory records due to things such as miscounting inventory received or sold, theft, waste/spoilage, and even obsolescence . In the way of review, the vendors sell inventory based on Free on Board (FOB) Shipping Point and Free on Board (FOB) Destination terms. Under FOB Shipping Point, the risk of loss and the cost of freight shifts to the buyer at the point goods are shipped to the buyer. Under FOB Destination, the risk of loss and the cost of freight stay with the seller until the merchandise reaches the buyer’s designated receipt point. A new consideration is consigned goods . These types of goods are not owned by the merchandiser. Ownership never passes from the seller. If such goods are sold, a merchandiser remits the net proceeds to the owner. The merchandiser collects a portion of the sale as a commission. For inventory that a merchandiser owns, there are four acceptable cost methods to use:
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This note was uploaded on 11/08/2011 for the course ACC 101 taught by Professor Scottcazzad during the Spring '11 term at Jefferson College.

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Chapter 6 Lectur - Chapter 6 Reporting and Analyzing Inventory The focus of Chapter 6 is merchandise inventory Inventory resulting from

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