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Chapter+7+Slides+with+notes - Chapter 7 Reporting and...

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Chapter 7 Reporting and Interpreting Cost of Goods Sold and Inventory Slide 1 Chapter Seven ACCT 2010 Fall 2011 Allen Huang Chapter 6 Review Reporting net sales Sales discount, credit card discount, sales returns and allowance are contra-revenue accounts. Accounting for bad debt expenses Record bad debt expense Bad debt exp (+E, SE) XXX Allowance for doubtful accounts (+XA, A) XXX Bad debt write-off Allowance for doubtful accounts ( XA, +A) XXX A/R( A XXX Slide 2 Chapter Seven A/R( A) Bad debt expense estimation methods I/S approach – percentage of credit net sales B/S approach – aging schedule
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Learning Objectives for Ch 7 Importance of inventories Some basics about inventory – Terminology – Physical and accounting flow Methods of accounting for inventory – FIFO, LIFO, weighted average, specific – Financial statement effects of different inventory method – Footnote disclosure Inventory write downs (Lower of Cost or Market) Slide 3 Chapter Seven Allowance for obsolescence Importance of Inventories • Definition: Inventory is tangible property held for sale in the normal course of business or will be used in producing goods or services for sale used in producing goods or services for sale. Inventory / Total assets = ? HSBC ~ 0 Accenture (Consulting) ~ 0 Cathay Pacific ~ 0 Slide 4 Chapter Seven 0 Toyota 5.0% Walmart 21.1% Boeing 29.0% Lukfook Jewellery 66.7%
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Costs Included in Inventory Purchases The cost principle requires that inventory be recorded at the price paid or inventory be recorded at the price paid or the consideration given. Invoice Price Freight Slide 5 Chapter Seven Inspection Costs Preparation Costs Flow of Inventory Costs Merchandise Cost of Merchandise Merchandiser Purchases Goods Sold Inventory Raw Materials Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Manufacturer Slide 6 Chapter Seven Cost of Goods Sold Direct Labor Factory Overhead
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Nature of Cost of Goods Sold Beginning Inventory Purchases for the Period Ending Inventory Goods available for Sale Cost of Goods Sold Slide 7 Chapter Seven (Balance Sheet) (Income Statement) Beginning inventory + Purchases = Goods Available for Sale Goods Available for Sale Goods Available for Sale – Ending inventory = Cost of goods sold Ending inventory = Cost of goods sold Income Statement Relation Supple the missing dollar amounts for the 2012 income statement for each of the following independent cases: Sales Revenue Beg. Inventory Purchase Total Available End. Inventory COGS Gross Profits Other Expense Pretax Income or Loss A $ 650 $100 $700 $ 500 $ 200 B 900 200 800 150 50 C 150 300 200 400 100 D 800 550 300 200 200 Slide 8 Chapter Seven E 1,000 900 1,100 500 (50)
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Income Statement Relation Supple the missing dollar amounts for the 2012 income statement for each of the following independent cases: Sales Revenue Beg.
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This note was uploaded on 12/20/2011 for the course ACCT/MGMT 2010 taught by Professor A during the Spring '11 term at HKUST.

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Chapter+7+Slides+with+notes - Chapter 7 Reporting and...

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