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ch08 - Learning Objectives Learning Objectives 1 2 3...

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8-1 1. Describe major classifications of inventory. 2. Perpetual vs. periodic inventory systems. 3. Identify & compute effects of inventory errors on the financial statements. 4. Items to include as inventory cost. 5. Cost flow assumptions used to account for inventories. 6. LIFO reserve. 7. Understand the effect of LIFO liquidations. 8. Explain the dollar-value LIFO method. 9. Identify the major advantages and disadvantages of LIFO. 10. Understand why companies select given inventory methods. Learning Objectives Learning Objectives Learning Objectives Learning Objectives
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8-2 Inventories are: items held for sale, or goods to be used in the production of goods to be sold. Inventory Issues Inventory Issues Inventory Issues Inventory Issues LO 1 Identify major classifications of inventory. Merchandiser Merchandiser Manufacturer Manufacturer Businesses with Inventory or Classification
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8-3 Classification Inventory Issues Inventory Issues Inventory Issues Inventory Issues Illustration 8-2 LO 1 Identify major classifications of inventory.
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8-4 Inventory Cost Flow Inventory Issues Inventory Issues Inventory Issues Inventory Issues Illustration 8-3 Companies use one of two types of systems for maintaining inventory records — perpetual system or periodic system . LO 2 Distinguish between perpetual and periodic inventory systems.
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8-5 Inventory Cost Flow Inventory Cost Flow Inventory Cost Flow Inventory Cost Flow LO 2 Distinguish between perpetual and periodic inventory systems. Perpetual System 1. Purchases of merchandise are debited to Inventory. 2. Freight-in is debited to Inventory. Purchase returns and allowances and purchase discounts are credited to Inventory. 3. Cost of goods sold is debited and Inventory is credited for each sale. 4. Subsidiary records show quantity and cost of each type of inventory on hand. The perpetual inventory system provides a continuous record of Inventory and Cost of Goods Sold.
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8-6 Inventory Cost Flow Inventory Cost Flow Inventory Cost Flow Inventory Cost Flow LO 2 Distinguish between perpetual and periodic inventory systems. Periodic System 1. Purchases of merchandise are debited to Purchases. 2. Ending Inventory determined by physical count. 3. Calculation of Cost of Goods Sold: Beginning inventory $ 100,000 Purchases, net 800,000 Goods available for sale
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8-7 Inventory Control Inventory Issues Inventory Issues Inventory Issues Inventory Issues LO 2 Distinguish between perpetual and periodic inventory systems.
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