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ch 5 notes - Cost – all actions taken to sell b If goods...

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Reporting and Analyzing Inventories I. Determining inventory items A. Components of inventory = goods that a company owns B. Special attention 1. Goods in transit a) FOB shipping point * Ownership transfers when shipping begins * Buyer pays shipping * Buyer inventory b) FOB destination * Ownership transfers when goods are delivered * Seller pays shipping * Seller inventory 2. Goods on consignment a) Definition: owner decided to give products to someone else to sell * Owner = consigner * Seller = consignee b) Even though the goods are in the consignee's warehouse, the goods are accounted for in the consigner's inventory 3. Goods damaged or obsolete a) If goods can be sold... * Included in inventory at net realizable cost
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Unformatted text preview: * Cost – all actions taken to sell b) If goods can not be sold. .. * Not included in inventory II. Determining inventory costs A. Includes all expenditures necessary to bring an item to a salable condition and location B. Net cost of purchases = invoice cost – returns – discounts and allowances + insurance costs + storage costs (if applicable) + import duties C. Perpetual system 1. Balance sheet: assets are reported in the form of ending inventory 2. Income statement: COGs are reported 3. Matching principle requires matching costs of sales with sales made and revenuse of sales with expenses made to get those revenues 4. Costing method...
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