Chapter07 - 1 CHAPTER 7 Cost of Goods Sold & Inventory...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 1 CHAPTER 7 Cost of Goods Sold & Inventory 2 Key Terms Inventory (beginning, ending) Cost of goods sold (COGS) Inventory cost flow assumptions Lower of cost or market (LCM) 3 Inventory Tangible property that is held for resale or will be used in producing goods or services Reported on the Balance Sheet as a current asset Inventory is recorded at cost Inventory cost includes invoice price, freight charges, inspection & preparation costs Periodic vs. perpetual inventory system We assume periodic inventory system in all exercise 4 Example: purchase of inventory On March 17, Anthony Company received merchandise from its normal supplier. The invoice price was $3,600 with terms of 2/10, n/30 for 100 units of Part #345. The invoice was paid on March 17. Freight costs were $120 and the company paid $108 of interest on a loan to pay for the inventory. Prepare the journal entry to record the purchase of inventory. 5 Cost of goods sold equation: Beginning inventory Purchases of merchandise Goods available for sale Goods available for sale Ending inventory Cost of goods sold Cost of goods sold + = = 6 Exercise: Compute cost of goods sold Magic Tunes Company sells iPods and iPod accessories in its retail store. Assume the following facts related to sales of one iPod model during 2008: Beginning ipod inventory = 300 units at a unit cost of $150 Ending ipod inventory = 200 units at a unit cost of $150 Purchases of ipods during the year = 450 units at a unit cost of $150 Using the cost of goods sold equation, compute the number of units and the cost of goods sold related to this model. 7 The Mustang Sweatshirt Company had 100 units of beginning inventory. During the period, two purchases of inventory were made. Ending inventory consists of 200 units. Thus, 400 units were sold. Beginning inventory 100 Purchases: #1 (250 units) 250 #2 (250 units) 250 Total purchases 500 Number of units available for sale 600 Ending inventory 200 Number of units sold 400 Beginning inventory 100 Purchases: #1 (250 units) 250 #2 (250 units) 250 Total purchases 500 Number of units available for sale 600 Ending inventory 200 Number of units sold 400 Illustration: Inventory Methods 8 Using these same facts about inventory, price per unit values have been added to the illustration....
View Full Document

This note was uploaded on 02/10/2012 for the course ACCT 2301 taught by Professor Li during the Fall '09 term at University of Central Florida.

Page1 / 18

Chapter07 - 1 CHAPTER 7 Cost of Goods Sold & Inventory...

This preview shows document pages 1 - 9. Sign up to view the full document.

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