Chapter 6 Notes - -2 steps of taking inventory physical...

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Chapter 6 Notes: Inventories -physical count! -Fob shipping point: buyer records goods in transit -Manufacturing company -raw materials -work in process -finished goods *ALL inventories included in current assets -Goods in transit purchased but not received, sold but not delivered -should be counted by who legally owns them -Consigned Goods: hold the goods of other parties and try to sell the goods for them for a fee without taking ownership -Cost flow assumptions: LIFO, FIFO, average-cost -LIFO allowed in US but not internationally -lower income taxes -Periodic system to take inventory because: -determine inventory on hand at balance sheet date -determine COGS for period
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Unformatted text preview: -2 steps of taking inventory: physical count and determining ownership-FOB Shipping Point: ownership passes to buyer when seller loads truck-FOB Destination: ownership passes to buyer when goods are received-During inflation, FIFO reports highest net income and LIFO lowest-opposite during recession-An error in the ending inventory of the current period will have a reverse effect on the net income of the next period-COGS/Average inventory= Inventory turnover-Days in Inventory=365/Inventory turnover-Perpetual:-FIFO: COGS prior to sale, same with LIFO-Average cost (moving average method)-new average after each purchase...
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