BMGT 220 - Chapter 5

BMGT 220 - Chapter 5 - CHAPTER 5 Reporting and Reporting...

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Reporting and Analyzing Inventories Reporting and Analyzing Inventories C H A P T E R 5
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Determining Inventory Items Merchandise inventory includes all goods that a company owns and holds for sale, regardless of where the goods are located when inventory is counted. Items requiring special attention include: Goods in Transit Goods Damaged or Obsolete Goods on Consignment 5-2
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FOB Destination Point Public Carrier Seller Buyer Goods in Transit Public Carrier Seller Buyer FOB Shipping Point Ownership passes to the buyer here. 5-3
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Determining Inventory Costs Invoice Cost Include all expenditures necessary to bring an item to a salable condition and location. Minus Discounts and Allowances Plus Import Duties Plus Freight-In Plus Storage Plus Insurance 5-4
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Internal Controls and Taking a Physical  Count Most companies take a physical count of inventory at least once each year. When the physical count does not match the Merchandise Inventory account, an adjustment must be made (SHRINKAGE) Most companies take a physical count of inventory at least once each year. When the physical count does not match the Merchandise Inventory account, an adjustment must be made (SHRINKAGE) I n v e t o r y C u T a g d b   _ Q i 5-5
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Inventory Costing Under a Perpetual System Inventory Inventory affects . . . affects . . . The matching The matching principle requires principle requires matching cost of matching cost of sales with sales. sales with sales. Balance Balance Sheet Sheet Balance Balance Sheet Sheet Income Income Statement Statement Income Income Statement Statement
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Inventory Costing Under a Perpetual  System Accounting for inventory requires several decisions . . . Costing Method. Specific Identification, FIFO, LIFO, or Weighted Average Inventory System. Perpetual or Periodic Items included in inventory and their costs. Use of market values or other estimates. Costing Method. Specific Identification, FIFO, LIFO, or Weighted Average Inventory System. Perpetual or Periodic Items included in inventory and their costs. Use of market values or other estimates.
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Knowledge Check # 1: Which of the following expressions  is  incorrect ? 1. Gross profit – operating expenses = net income 2. Sales – cost of goods sold – operating expenses = net income 3. Net income + operating expenses = Gross Profit 4. Operating expenses – cost of goods sold = gross profit
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Knowledge Check # 2: Ending inventory is equal to the cost of  items on hand plus 1. Merchandise in transit sold to customers, FOB shipping point 2. Merchandise in transit sold to customers, FOB destination 3. The cost of all inventory purchased during the period 4. Merchandise purchased in transit with terms FOB destination
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First-In, First-Out (FIFO) Assumes costs flow in the order incurred.
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BMGT 220 - Chapter 5 - CHAPTER 5 Reporting and Reporting...

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