Chapter6

Chapter6 - Accounting for Inventory Income Statement...

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Accounting for Inventory Income Statement Service Merchandising Company Company Income Service Revenue Sales Revenue Expenses Cost of Goods Sold Operating Expenses Operating Expenses Cost of Goods Sold : Total cost of merchandise sold during the period . Number of units sold x cost First expense that does not have the word “expense” in the title Freight-out : Freight on goods sold . It is and operating expense. Gross Profit (Gross Margin) : Sales Revenue – Cost of Goods Sold =Gross Profit Gross Profit – Operating Expenses = Net Income Balance Sheet
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Service Merchandising Company Company Supplies Inventory Inventory cost - “all costs incurred to bring the asset to its intended use .” Number of units on hand x cost Freight-in is a part of inventory cost . Merchandise tracked through inventory system (1) Periodic Inventory Detail of Inventory not maintained Recorded in a Purchases account Cost of Goods Sold determined at end of period with a physical account (2) Perpetual Inventory Detail of Inventory maintained continuously Recorded in the Inventory account Cost of Goods Sold determined each time a sale made Perpetual Inventory-Purchasing Goods
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ShoeCo purchase 2100 pairs of shoes at $20 per pair on account the terms were 2/10, n/30 ShoeCo returned 100 pairs of shoes ShoeCo paid freight on the purchase and return of $800 ShoeCo paid the account payable within 10 days Summarize the Purchase Price of Inventory + Purchase Price of Inventory 42,000 +Freight-In 800 - Purchase Returns (2,000) - Purchase Discounts (800) =Net Purchase of Inventory 40,000 Perpetual Inventory –Selling Goods
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This test prep was uploaded on 04/07/2008 for the course ACCT 2001 taught by Professor Lowe during the Spring '08 term at LSU.

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Chapter6 - Accounting for Inventory Income Statement...

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