18 Inventory_Measurement - 18 RetailInventoriesand...

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
Retail Inventories and  Retail Inventories and  Cost Flow Assumptions Cost Flow Assumptions Accountancy 301 Spring 2011 Flora Zhou 18
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Today Today ’s agenda ’s agenda • Product vs. period costs • How are physical quantities in inventory  determined– perpetual vs. periodic inventory  systems • How to allocate goods available for sale between  COGS and Ending inventory--Cost flow  assumptions – FIFO  – LIFO – Average cost • LIFO reserve, LIFO liquidation, and LIFO 
Background image of page 2
Product vs. period costs Product vs. period costs • Product costs – Costs involved in making (acquiring) a product • Direct materials • Direct labour • Manufacturing overhead – Assigned to inventories and considered  assets  until sold • Period costs – All other costs (e.g. Selling costs, Administration costs) – Taken directly to income statement as  expenses
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Cost of goods sold – retail  Cost of goods sold – retail  companies companies Inventory Purchases Cost of  Goods Sold Expense (Income Statement) Asset (Balance Sheet) Sales
Background image of page 4
Cost of goods sold measurement Cost of goods sold measurement Beginning inventory + Purchases during period = Goods available for sale -  Ending inventory = Cost of goods sold
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Cost of goods sold - manufacturer Cost of goods sold - manufacturer RM  Inventory WIP  Inventory FG  Inventory Purchases Requisitions Overhead Direct Labor Cost of  Goods  Sold Sales Assets (Balance Sheet) Expense (Income  Statement )
Background image of page 6
Cost of goods manufactured  Cost of goods manufactured  measurement measurement Beginning RM inventory    + RM purchased during year     -  RM ending inventory = RM used during year    + Direct labor costs incurred    + Factory overhead costs incurred    + Beginning work in process inventory     -  Ending work in process inventory = Cost of goods manufactured
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
  Which of the following transactions would  immediately result in an expense?  A. Work in process is completed. B. Finished goods are sold. C. Raw materials are placed into production. D. Plant managers’ salaries are accrued and paid.     Wake-Up Question  Wake-Up Question 
Background image of page 8
Determining inventory quantities Determining inventory quantities • There are two inventory systems Periodic  inventory system updates inventory  records only periodically Perpetual  inventory system maintains a  continuous record of inventory changes • We will focus primarily on periodic  inventory system
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Determining inventory quantities: Determining inventory quantities: Perpetual inventory system Perpetual inventory system This approach keeps a running (or “perpetual”)  record of the amount of inventory on hand. The inventory T-account under a perpetual 
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 32

18 Inventory_Measurement - 18 RetailInventoriesand...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online