ACCT 652 Accounting. Review of last week. Review of last time (2) 1/25/16. Week 3 Merchandisers and special journals

Size: px
Start display at page:

Download "ACCT 652 Accounting. Review of last week. Review of last time (2) 1/25/16. Week 3 Merchandisers and special journals"

Transcription

1 ACCT 652 Accounting Week 3 Merchandisers and special journals Some slides Times Mirror Higher Education Division, Inc. Used by permission Michael D. Kinsman, Ph.D. Review of last week Some highlights of what we did last week are: We introduced the General Journal. We introduced the General Ledger. We posted from the GJ to the GL. We use explanations in only five situations. Dollar signs only go in formal financial statements. ACCT 652 Week 3 2 Review of last time (2) The accounting process. Contra accounts. Cash and accrual accounting. Reversing entries. ACCT 652 Week 3 3 1

2 General Journal and General Ledger posting GENERAL JOURNAL Page 1 Date Description Post. Ref. Debit Credit Dec. 1 Cash , T. Dow, Capital 30, Investment by owner. GENERAL LEDGER Account: Cash Acct. No. 101 Date Item Post. Ref. Debit Credit Balance Dec. 1 J1 30, , ACCT 652 Week 3 4 Five explanations only in the GL Opening Closing Adjusting Error Correction Reversing ONLY those five have explanations. ACCT 652 Week 3 5 Contra accounts Contra accounts are, in fact, parts of other accounts. You can usually spot them in a Balance Sheet or an Income Statement because of the word less or net of, as in Accounts receivable, less allowance for doubtful accounts Accounts receivable, net of allowance for doubtful accounts We have contra accounts because they preserve information: In the above example, we know how much accounts receivable we have and how much we expect to write off. ACCT 652 Week 3 6 2

3 Cash basis businesses When is revenue? That is to say, when do you recognize revenue? You recognize revenue when you get the cash. That means cash basis businesses don t have accounts receivable on their books. They simply keep a list of receivables. They also recognize expense when they actually pay the bill. ACCT 652 Week 3 7 Accrual basis businesses When is revenue? That is to say, when do you recognize revenue? You recognize revenue when you complete a sale. Completing a sale means that you have shipped product and the customer has agreed to pay. ACCT 652 Week 3 8 The example from last week A company had accrual basis profits of $95,000 in It had ending 2014 (beginning 2015) A/R of $5,000, and ending 2015 A/R of $10,000. It had ending 2014 (beginning 2015) A/P of $3,000, and ending 2015 A/P of $5,000. What is the company s cash basis profit for 2015? ACCT 652 Week 3 9 3

4 Last week s problem answer Accrual basis income 95, Minus change in accounts receivable -Ending receivables (10,000.00) +Beginning receivables 5, (5,000.00) Plus change in accounts payable: +Ending payables 5, Beginning payables (3,000.00) 2, Cash basis income 92, ACCT 652 Week 3 10 Reversing entries When a bookkeeper is keeping books on a cash basis, and we convert them to an accrual basis with adjusting entries, there is a chance the bookkeeper will become confused. To fix that problem, we do reversing entries which exactly reverse the accrual adjustment. Those are posted the first day of the period. ACCT 652 Week 3 11 Miscellaneous little stuff Remember that, despite the fact that most of the examples do not include cents in their answers (for neatness in the book, I suppose), you should include them in your answers: $100 is not written as $100 or even as $ It should be written as $ ACCT 652 Week

5 Miscellaneous little stuff Underlines are another little stuff that you should be aware of. When you have a column of numbers that is (sub) totalled, you put a single underline under the last number to be totalled. Below the final total you put a double underline. ACCT 652 Week 3 13 Miscellaneous little stuff Finally, you put dollar signs at the top of a column of numbers and above the double underline--see the next page for an example. ACCT 652 Week 3 14 Miscellaneous little stuff Sales $10, Cost of goods sold 7, Shippi ng Gross profit 2, Sales salaries $ Rent Other stuff $1, , Net income $ ACCT 652 Week

6 Miscellaneous little stuff Remember that the balance sheet is, in fact, two statements--a statement of assets and a statement of liabilities and owners equity. Therefore, there are two tops of columns. Even though they are on the same page, they are two statements. ACCT 652 Week 3 16 Consider merchandisers The difference between merchandisers and service businesses is that merchandisers sell tangible merchandise. That means that they will have inventories. But having inventories means they must be accrual basis. ACCT 652 Week 3 17 First, a puff-ball question How do you record the entry when a merchandiser makes a sale? GENERAL JOURNAL Page Post. Date Description Ref. Debit Credit MM DD Cash (or Accounts Receivable) Sales Record sales ACCT 652 Week

7 Suppose you have returns? Both of those items, which cost $100 each, were returned, one because it was not needed, the other because it was a little dirty. Because you are a good salesperson, you are able to convince the buyer to accept $5 as a cleaning allowance instead of returning the item. How do you record the return and the allowance? ACCT 652 Week 3 19 Handling returns and allowances GENERAL JOURNAL Page Post. Date Description Ref. Debit Credit MM DD Cash (or Accounts Receivable) Sales Record sales MM DD+ Sales returns and allowances Cash (or Accounts Receivable) Record the return ACCT 652 Week 3 20 Accounts receivable You receive a bill that says TERMS 2/10 net 30. What does that mean? You can pay with two 10 s, and they send out a net for you at day 30. Not. ACCT 652 Week

8 Accounts receivable You receive a bill that says TERMS 2/10 net 30. What does that mean? You get a 2 percent discount if you pay the bill within 10 days, and you are expected to pay the full bill by day 30. ACCT 652 Week 3 22 Recording discounts How do you record paying a 2/10 net 30 bill for $100? It depends on what you want to emphasize. ACCT 652 Week 3 23 Method A show opportunities lost If you normally expect to take a discount, and want your statements to show when you goofed by not taking one, record as follows: GENERAL JOURNAL Page Post. Date Description Ref. Debit Credit M M DD Purchases Accounts payable Record purchase MM DD+ Accounts payable Cash Record payment on day 10 *********OR********* MM DD+ Accounts payable Discounts lost 2.00 Cash Record payment after day 10 ACCT 652 Week

9 Method A show opportunities lost This will lead to an expense item in your Trial Balance showing the amounts of all discounts lost during the year. This is a measure of how well you are following through in taking expected discounts. ACCT 652 Week 3 25 Method B show opportunities taken Suppose, instead, that you do not expect to take the discount. Then you would enter: GENERAL JOURNAL Page Post. Date Description Ref. Debit Credit M M DD Purchases Accounts payable Record purchase MM DD+ Accounts payable Cash Discounts taken 2.00 Record payment on day 10 *********OR********* MM DD+ Accounts payable Cash Record payment after day 10 ACCT 652 Week 3 26 Method B show opportunities taken In this method, you end up with a revenue item on your Trial Balance showing discounts taken. ACCT 652 Week

10 Which method shows the higher profits? You can prove to yourself with a minimum of effort that both Method A and Method B show exactly the same profits. ACCT 652 Week 3 28 The best method The best method is to mix the methods. When you expect to take the discount, use Method A. Then, if you don t take a planned discount, you show the error on the trial balance. When you expect not to take the discount (for example, because it isn t worth it ), use Method B. Then, if you erroneously take the discount, you show the error on the trial balance. ACCT 652 Week 3 29 Should you always take discounts? Suppose that money cost you 50 percent per year, and that you were offered a discount of 1/10, net 100. Would you take that discount? The interest rate you earn on your money by taking the discount is given by the formula Rate = [(Discount %)/(100 - discount %)] * [365 / (net days - discount days)] ACCT 652 Week

11 Should you always take discounts? Using the 1/10 net 100 example, we d have: Rate = [1 / (100-1)] * [365 /(100-10)] = [1/99] * 365/90 = 4.096% per year Comparing the approximately 4% annual return you get with the 50% cost of financing it, you don t want to take the discount. ACCT 652 Week 3 31 Cost of goods sold Cost of goods sold is like a bathtub: Where 1 is beginning inventory, 2 is purchases, 3 is cost of goods, 4 is ending inventory, and 5 is evaporation. 3 ACCT 652 Week 3 32 Cost of goods sold (2) You know that it s true in bathtubs that = Beginning water + Additions = What went out the drain + Ending water + Evaporation Or, for inventory Beginning inventory + Purchases = Cost of goods sold + Ending inventory + Evaporation ACCT 652 Week

12 What we know in the cost of goods sold equation In inventory, we know the beginning inventory, because we counted it. We know the ending inventory, because we counted it. We know our purchases, because we logged them in. We do not, necessarily, know CGS or Evaporation. ACCT 652 Week 3 34 Calculating cost of goods sold So now we have to calculate CGS and Evaporation: Cost of Goods Sold + Evaporation = Beginning inventory + Purchases - Ending inventory How much is CGS and how much is evaporation does matter, because evaporation is stuff we lost. ACCT 652 Week 3 35 Cost of goods sold: Evaporation We must estimate, based on history (markup percentages) or sampling, how much is evaporation and how much is CGS. This is needed for management purposes, to make sure we don t get ripped off. For financial accounting, both are treated as part of Cost of Goods Sold (CGS). ACCT 652 Week

13 Freight In Freight in is just part of cost of goods sold. We may choose to keep it in a separate account, but it will end up as part of CGS. ACCT 652 Week 3 37 Worksheet for a merchandiser Unadjusted Income Balance Account Trial Balance Adjustments Statement Sheet No. Name Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. 101 Cash 8, , Accounts receivable 11, , Inventory 19, , , , Office supplies 2, , Store supplies 1, , Prepaid insurance Office equipment 4, , Accumulated deprec. - 1, OE Store equipment 30, , Accumulated deprec. - 6, SE 3, , Accounts payable 16, , Salaries payable Meg capital 34, , Meg withdrawals 4, , Sales 321, , Sales 2, returns and allow 2, Sales discounts 4, , Purchases 235, , Purchase R&A - 1, , Purchase discounts 4, , Transportation in 2, , Depreciation exp, 3, SE 3, Depreciation exp, OE Office salaries expense 25, , Sales salaries expense 18, , Insurance expense Rent expense Office Rent expense. Selling 8, , Office supplies expense 1, , Store supplies expense 1, , Advertising expense 2, , , , , , , , , , ACCT 652 Week 3 21, , , , , , Adjusting entry method Unadjusted Income Balance Account Trial Balance Adjustments Statement Sheet No. Name Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. 101 Cash 8, , Accounts receivable 11, , Inventory 19, , , , Office supplies 2, , Store supplies 1, , Prepaid insurance Office equipment 4, , Accumulated deprec. - 1, OE Store equipment 30, , Accumulated deprec. - 6, SE 3, , Accounts payable 16, , Salaries payable Meg capital 34, , Meg withdrawals 4, , Sales 321, , Sales 2, returns and allow 2, Sales discounts 4, , Purchases 235, , , Purchase R&A - 1, , Purchase discounts 4, , Transportation in 2, , Depreciation exp, 3, SE 3, Depreciation exp, OE Office salaries expense 25, , Sales salaries expense 18, , Insurance expense Rent expense Office Rent expense. Selling 8, , Office supplies expense 1, , Store supplies expense 1, , Advertising expense 2, , , , , , , , , , ACCT 652 Week 3 21, , , , , ,

14 Which method do I use? You can use either method to adjust ending inventory that you wish but you must only use one of the two methods. Note that the answer (net income and ending inventory) is identical for both methods. Which you use is simply a matter of which makes most sense to you. ACCT 652 Week 3 40 Items to Include in Merchandise Inventory To determine whether goods in transit or goods sold but not delivered should be included in inventory, the FOB terms must be reviewed. FOB destination: seller s goods in transit. FOB selling point: buyer s goods in transit. ACCT 652 Week 3 41 What gets included in Merchandise Inventory? Goods on consignment are shipped by their owner (the consignor) to another person or business (the consignee) who sells the goods for the owner. Goods that are not sold at the inventory date are included in the consignor s inventory count. ACCT 652 Week

15 Items to Include in Merchandise Inventory Obsolete and damaged goods should not be counted in the inventory if they are not saleable. If these goods can be sold at a reduced price, they should be included in the inventory at a conservative estimate of their net realizable value (sales price less cost of making the sale). ACCT 652 Week 3 43 Assigning Costs to Inventory Items What are the commonly used inventory methods? Specific Invoice Prices Weighted-Average Cost First-in, First-Out (FIFO) Last-in, First-Out (LIFO) First-in, Still-Here (FISH) ACCT 652 Week 3 44 Method 1: Specific Invoice Prices Specific cost of each inventory item is known. Used with small volume, high dollar inventory such as cars, mobile homes, and jewelry. Prices are assigned to each item in the inventory. ACCT 652 Week

16 Method 2: Weighted Average Compute cost of goods available for sale: CGAS = Dollars of beginning inventory + Dollars of Purchases Compute total units available for sale: TUAS = Units in beginning inventory + Units Purchased ACCT 652 Week 3 46 Weighted Average Compute weighted-average cost (WAC) per unit WAC per Unit = CGAS TUAS Compute ending inventory Ending Inventory = Units in Ending Inventory * WAC per Unit Compute COGS COGS = Units Sold * WAC per Unit ACCT 652 Week 3 47 Weighted Average Example (1) The schedule on the next screen shows the mouse pad inventory for The physical inventory count shows 800 mouse pads in ending inventory. Use the weighted average inventory pricing method to determine: (1) Ending inventory cost (2) Cost of goods sold ACCT 652 Week

17 Weighted Average Example (2) Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 1,000 $ 5.25 $ 5, Purchases: 1/ / / , / Goods Available for Sale 1,550 $ 8, Ending Inventory 800 Cost of Goods Sold ACCT 652 Week 3 49 Weighted Average Example Answer Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 1,000 $ 5.25 $ 5, Purchases: 1/ / / , / Goods Available for Sale 1, $ 8, Ending Inventory $ 4, Cost of Goods Sold $ 4, ACCT 652 Week 3 50 Method 3: First-In, First-Out The costs of the oldest inventory items are charged to COGS when goods are sold. The costs of the newest inventory items remain in ending inventory. The actual physical flow of inventory items may differ from the FIFO cost flow assumptions. ACCT 652 Week

18 First-In, First-Out Example (1) The schedule on the next screen shows the mouse pad inventory for The physical inventory count shows 800 mouse pads in ending inventory. Use the FIFO inventory pricing method to determine: (1) Ending inventory cost (2) Cost of goods sold ACCT 652 Week 3 52 First-In, First-Out Example (2) Mouse Pad Inventory Units $/Unit Date Total Beginning Inventory 1,000 $ , $ Purchases: 1/ / / , / Goods Available for $ Sale 1,550 8, Ending Inventory 800 Cost of Goods Sold ACCT 652 Week 3 53 First-In, First-Out Ending Inventory (in blue) Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 750 $ 5.25 $ 3, $ 5.25 $ 1, Purchases: 1/ / / , / Goods Available for Sale 1,550 $ 8, Ending Inventory 800 $ 4, Cost of Goods Sold ACCT 652 Week

19 First-In, First-Out Cost of Goods Sold (in green) Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 750 $ 5.25 $ 3, $ 5.25 $ 1, Purchases: 1/ / / , / Goods Available for Sale 1,550 $ 8, Ending Inventory 800 $ 4, Cost of Goods Sold 750 $ 5.25 $ 3, ACCT 652 Week 3 55 Method 4: Last-In, First-Out The costs of the newest inventory items are charged to COGS when goods are sold. The costs of the oldest inventory items remain in ending inventory. The actual physical flow of inventory items may differ from the LIFO cost flow assumptions, although I do think I got some hundred year old lettuce last night at the store! ACCT 652 Week 3 56 Last-In, First-Out Example (1) The schedule on the next screen shows the mouse pad inventory for The physical inventory count shows 800 mouse pads in ending inventory. Use the LIFO inventory pricing method to determine: (1) Ending inventory cost (2) Cost of goods sold ACCT 652 Week

20 Last-In, First-Out Example (2) Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 1,000 $ 5.25 $ 5, Purchases: 1/ / / , / Goods Available for Sale 1,550 $ 8, Ending Inventory 800 Cost of Goods Sold 750 ACCT 652 Week 3 58 Last-In, First-Out Ending Inventory (in blue) Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 800 $ 5.25 $ 4, $ 5.25 $ 1, Purchases: 1/ / / , / Goods Available for Sale 1,550 $ 8, Ending Inventory 800 $ 4, Cost of Goods Sold 750 ACCT 652 Week 3 59 Last-In, First-Out Cost of Goods Sold (in green) Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 800 $ 5.25 $ 4, $ 5.25 $ 1, Purchases: 1/ / / , / Goods Available for Sale 1,550 $ 8, Ending Inventory 800 $ 4, Cost of Goods Sold 750 $ 4, ACCT 652 Week

21 Comparison of Methods Income Statement For Year Ended December 31, 19X2 Specific Invoice Prices Weighted Average FIFO* LIFO Net sales $ 25,000 $ 25,000 $ 25,000 $ 25,000 Cost of goods sold: Merchandise inventory, 12/31/X1 $ 5,250 $ 5,250 $ 5,250 $ 5,250 Net purchases 3,120 3,120 3,120 3,120 Goods available for sale $ 8,370 $ 8,370 $ 8,370 $ 8,370 Merchandise inventory, 12/31/X2 4,310 4,320 4,433 4,200 Cost of goods sold $ 4,060 $ 4,050 $ 3,938 $ 4,170 Gross profit from sales $ 20,940 $ 20,950 $ 21,063 $ 20,830 Operating expenses: Income before taxes $ 20,190 $ 20,200 $ 20,313 $ 20,080 Income taxes expense (30%) 6,057 6,060 6,094 6,024 Net income $ 14,133 $ 14,140 $ 14,219 $ 14,056 * FIFO amounts were rounded. ACCT 652 Week 3 61 Comparison of Methods In a period of rising prices, FIFO results in the highest ending inventory, the lowest cost of goods sold, the highest gross profit, and the highest net income. Income Statement For Year Ended December 31, 19X2 Specific Invoice Weighted Prices Average FIFO* LIFO $ 25,000 $ 25,000 25,000 25,000 Net sales $ $ Cost of goods sold: Merchandise inventory, 12/31/X1 5,250 $ 5,250 $ 5,250 $ $ 5,250 3,120 Net purchases 3,120 3,120 3,120 Goods available for sale 8,370 8,370 8,370 8,370 $ $ $ $ 4,200 Merchandise inventory, 12/31/X2 4,310 4,320 4,433 Cost of goods sold 4,060 4,050 3,938 4,170 $ $ $ $ $ 20,830 Gross profit from sales 20,940 $ 20,950 $ 21,063 $ 750 Operating expenses: Income before taxes 20,190 20,200 20,313 20,080 $ $ $ $ 6,024 Income taxes expense (30%) 6,057 6,060 6,094 Net income 14,133 14,140 14,219 14,056 $ $ $ $ * FIFO amounts were rounded. ACCT 652 Week 3 62 Comparison of Methods In a period of rising prices, LIFO results in the lowest ending inventory, the highest cost of goods sold, the lowest gross profit, and the lowest net income. Income Statement For Year Ended December 31, 19X2 Specific Invoice Prices Weighted Average FIFO* LIFO Net sales $ 25,000 $ 25,000 $ 25,000 $ 25,000 Cost of goods sold: Merchandise inventory, 12/31/X1 $ 5,250 $ 5,250 $ 5,250 $ 5,250 Net purchases 3,120 3,120 3,120 3,120 Goods available for sale $ 8,370 $ 8,370 $ 8,370 $ 8,370 Merchandise inventory, 12/31/X2 4,310 4,320 4,433 4,200 Cost of goods sold $ 4,060 $ 4,050 $ 3,938 $ 4,170 Gross profit from sales $ 20,940 $ 20,950 $ 21,063 $ 20,830 Operating expenses: Income before taxes $ 20,190 $ 20,200 $ 20,313 $ 20,080 Income taxes expense (30%) 6,057 6,060 6,094 6,024 Net income $ 14,133 $ 14,140 $ 14,219 $ 14,056 * FIFO amounts were rounded. ACCT 652 Week

22 Comparison of Methods As you might expect, Income the Statement results of using For the Year weighted Ended December 31, 19X2 Specific average method usually Invoice fall Weighted between FIFO and LIFO. Prices Average FIFO* LIFO Net sales $ 25,000 $ 25,000 $ 25,000 $ 25,000 Cost of goods sold: Merchandise inventory, 12/31/X1 $ 5,250 $ 5,250 $ 5,250 $ 5,250 Net purchases 3,120 3,120 3,120 3,120 Goods available for sale $ 8,370 $ 8,370 $ 8,370 $ 8,370 Merchandise inventory, 12/31/X2 4,310 4,320 4,433 4,200 Cost of goods sold $ 4,060 $ 4,050 $ 3,938 $ 4,170 Gross profit from sales $ 20,940 $ 20,950 $ 21,063 $ 20,830 Operating expenses: Income before taxes $ 20,190 $ 20,200 $ 20,313 $ 20,080 Income taxes expense (30%) 6,057 6,060 6,094 6,024 Net income $ 14,133 $ 14,140 $ 14,219 $ 14,056 * FIFO amounts were rounded. ACCT 652 Week 3 64 Comparison of Methods The results for the specific invoice prices method depend entirely on Income Statement For Year Ended December 31, 19X2 Specific Invoice Prices Weighted Average FIFO* LIFO $ $ 25,000 $ 25,000 $ 25,000 Net sales 25,000 Cost which of goods units sold: are Merchandise sold. inventory, 12/31/X1 $ 5,250 $ 5,250 $ 5,250 $ 5,250 Net purchases 3,120 3,120 3,120 3,120 Goods available for sale $ 8,370 $ 8,370 $ 8,370 $ 8,370 Merchandise inventory, 12/31/X2 4,310 4,320 4,433 4,200 Cost of goods sold $ 4,060 $ 4,050 $ 3,938 $ 4,170 Gross profit from sales $ 20,940 $ 20,950 $ 21,063 $ 20,830 Operating expenses: Income before taxes $ 20,190 $ 20,200 $ 20,313 $ 20,080 Income taxes expense (30%) 6,057 6,060 6,094 6,024 Net income $ 14,133 $ 14,140 $ 14,219 $ 14,056 * FIFO amounts were rounded. ACCT 652 Week 3 65 Comparison of Methods Each of the four methods is acceptable, and an argument can be made for using each. The choice of an inventory method must be disclosed in the notes to the financial statements. This information is important to understanding the financial statements and is required by the full-disclosure principle. ACCT 652 Week

23 Tax Effect of LIFO Note that a tax advantage in the form of lower tax expense was gained by using LIFO. This is because LIFO reports the lowest net income amount which results in the lowest tax expense. ACCT 652 Week 3 67 Consistency Principle Because the choice of an inventory method can have a significant effect on the financial statements, a company might be inclined to select a new method each year that would result in the most favorable financial statements. However, the consistency principle requires that companies use the same accounting methods period after period so the financial statements of succeeding periods will be comparable. ACCT 652 Week 3 68 Inventory Errors-Periodic System Misstatements in inventory may cause errors in the following areas: Income Statement COGS, Gross Profit, Net Income Balance Sheet Inventory, Payables, Retained Earnings Also, the ending inventory of one period becomes the beginning inventory of the next period. Thus, the miscount problem is self-correcting over time. ACCT 652 Week

24 Perpetual Inventory Systems The inventory account is continuously up-dated for the following items: Inventory purchases Inventory returns & discounts Inventory sales At the end of period, we do a periodic inventory to check accuracy. Perpetual gives us a better idea of what we have at a moment in time. ACCT 652 Week 3 70 Lower of Cost or Market A company may apply LCM three different ways: Separately to each product. To major categories of products. To the inventory as a whole. ACCT 652 Week 3 71 Conservatism Principle Generally accepted accounting principles require writing inventory down to market value when market value is less than cost. However, when market value is greater than cost, the inventory is not written up to market value. ACCT 652 Week

25 Estimating Inventories Most companies prepare financial statements on a quarterly or monthly basis. These financial statements are called interim financial statements. In a periodic inventory system, a physical inventory is required to determine the ending inventory and cost of goods sold amounts. ACCT 652 Week 3 73 Estimating Inventories However, since taking a physical inventory is expensive and time consuming, most companies estimate the ending inventory and cost of goods sold amounts using one of two methods: Retail inventory method Gross profit method Because these methods are well explained in your book, I am not going over them in class. ACCT 652 Week 3 74 End of week 3! We are done. Remember that the exam will be passed out next week, to be returned a few days later. The exam is open book, open notes, but is to be done alone without other assistance. I will not answer questions after passing it out so Ask questions next week! ACCT 652 Week

ACCT 652 Accounting. Review of last week. Should you always take discounts? 5/17/15. ACCT652 Week 4 1

ACCT 652 Accounting. Review of last week. Should you always take discounts? 5/17/15. ACCT652 Week 4 1 ACCT 652 Accounting Week 4 Special Journals, Cash, and Internal Controls Some slides Times Mirror Higher Education Division, Inc. Used by permission Michael D. Kinsman, Ph.D. Review of last week Some highlights

More information

INVENTORY VALUATION THE SIGNIFICANCE OF INVENTORY

INVENTORY VALUATION THE SIGNIFICANCE OF INVENTORY THE SIGNIFICANCE OF INVENTORY INVENTORY VALUATION In the balance sheet inventory is frequently the most significant current asset. In the income statement, inventory is vital in determining the results

More information

Chapter 6. Inventories

Chapter 6. Inventories 1 Chapter 6 Inventories 2 Learning objectives 1. Define and identify the items included in inventory at the reporting date 2. Determine the s to be included in the value of inventory 3. Describe the four

More information

Financial Accounting. John J. Wild. Sixth Edition. McGraw-Hill/Irwin. Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Financial Accounting. John J. Wild. Sixth Edition. McGraw-Hill/Irwin. Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Financial Accounting John J. Wild Sixth Edition McGraw-Hill/Irwin Copyright 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 05 Reporting and Analyzing Inventories Conceptual Chapter

More information

Chapter 6. An advantage of the periodic method is that it is a easy system to maintain.

Chapter 6. An advantage of the periodic method is that it is a easy system to maintain. Chapter 6 Periodic and Perpetual Inventory Systems There are two methods of handling inventories: the periodic inventory system, and the perpetual inventory system With the periodic inventory system, the

More information

Chapter 5. Accounting for merchandising operations. Appendix 5A: Periodic inventory system

Chapter 5. Accounting for merchandising operations. Appendix 5A: Periodic inventory system 1 Chapter 5 Accounting for merchandising operations Appendix 5A: Periodic inventory system 2 Learning objectives 1. Record purchase and sales transactions under the periodic inventory system 2. Prepare

More information

Accounting II Second Semester Final

Accounting II Second Semester Final Name: Class: Date: Accounting II Second Semester Final Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. Profit is the difference between:

More information

Inventories: Measurement

Inventories: Measurement RECORDING AND MEASURING INVENTORY TYPES OF INVENTORY There are two types of inventories depending on the kind of business operation. Merchandise Inventory A merchandising concern buys and resells inventory

More information

Week 9/ 10, Chap7 Accounting 1A, Financial Accounting

Week 9/ 10, Chap7 Accounting 1A, Financial Accounting Week 9/ 10, Chap7 Accounting 1A, Financial Accounting Reporting and Interpreting Cost of Goods Sold and Inventory Instructor: Michael Booth Understanding the Business Primary Goals of Inventory Management

More information

Chapter 6 Homework BRIEF EXERCISE 6-6

Chapter 6 Homework BRIEF EXERCISE 6-6 Chapter 6 Homework BRIEF EXERCISE 6-6 Dec. 31 Sales... 630,000 Merchandise Inventory (December 31)... 90,000 Purchase Returns and Allowances... 11,000 Capital... 731,000 Dec. 31 Capital... 476,000 Merchandise

More information

Investments Advance to subsidiary company 81,000

Investments Advance to subsidiary company 81,000 EXERCISE 7-3 (10 15 minutes) Current assets Accounts receivable Customers Accounts (of which accounts in the amount of $40,000 have been pledged as security for a bank loan) $79,000 Installment accounts

More information

Chapter 8. Inventory Chapters. Learning Objectives. Learning Objectives. Inventory. Inventory. Valuation of Inventories: A Cost-Basis Approach

Chapter 8. Inventory Chapters. Learning Objectives. Learning Objectives. Inventory. Inventory. Valuation of Inventories: A Cost-Basis Approach Chapter 8 Valuation of Inventories: A Cost-Basis Approach Chapters Topic of chapters 8 and 9 : Asset on balance sheet Cost of goods sold: Expense on I/S See Safeway, Dr. Pepper, Campbell, Grainger, Amazon,

More information

Accounting 201 Comprehensive Practice Exam 2C Page 1

Accounting 201 Comprehensive Practice Exam 2C Page 1 Accounting 201 Comprehensive Practice Exam 2C Page 1 1. A business organized as a corporation a. is not a separate legal entity in most states. b. requires that stockholders be personally liable for the

More information

Perpetual vs. Periodic Inventory Accounting

Perpetual vs. Periodic Inventory Accounting Chapter 6 INVENTORY In the balance sheet of merchandising and manufacturing companies, inventory is frequently the most significant current asset. In the income statement, inventory is vital in determining

More information

In the event of a tie, the score on the last ten questions will be used as a tie-breaker.

In the event of a tie, the score on the last ten questions will be used as a tie-breaker. NEW YORK STATE ASSOCIATION FUTURE BUSINESS LEADERS OF AMERICA SPRING DISTRICT MEETING ACCOUNTING II 2010 TEST DIRECTIONS 1. Complete the information requested on the answer sheet. PRINT your name on the

More information

1. $45000 2. $108000 3. $63000 4. $135000

1. $45000 2. $108000 3. $63000 4. $135000 For the last several years Monte Cristo Corp. has operated with a gross profit rate of 30%. On January 1 of the current year, the company had on hand inventory with a cost of $150,000. Purchases of merchandise

More information

The Measurement of the Business Income. 1 by recording revenues when earned and expenses when incurred. 2 by adjusting accounts

The Measurement of the Business Income. 1 by recording revenues when earned and expenses when incurred. 2 by adjusting accounts Recap from Week 3 The Measurement of the Business Income The primary objective of accounting is measuring the net income of the businesses according to the generally accepted accounting principles. Net

More information

Valuation of inventories

Valuation of inventories Valuation of inventories The sale of inventory at a price greater than total cost is the primary source of income for manufacturing and retail businesses. Inventories are asset items held for sale in the

More information

Merchandise Inventory, Cost of Goods Sold, and Gross Profit. Pr. Zoubida SAMLAL

Merchandise Inventory, Cost of Goods Sold, and Gross Profit. Pr. Zoubida SAMLAL Merchandise Inventory, Cost of Goods Sold, and Gross Profit Pr. Zoubida SAMLAL 1 Accounting for Inventory Inventory (balance sheet) = Number of units of inventory on hand X Cost per unit of inventory Cost

More information

4/10/2012. Inventories and Cost of Goods Sold. Learning Objectives (LO) Learning Objectives (LO) LO 1 Gross Profit and Cost of Goods Sold

4/10/2012. Inventories and Cost of Goods Sold. Learning Objectives (LO) Learning Objectives (LO) LO 1 Gross Profit and Cost of Goods Sold Learning Objectives (LO) Inventories and Cost of Goods Sold CHAPTER 7 After studying this chapter, you should be able to 1. Link inventory valuation to gross profit 2. Use both perpetual and periodic inventory

More information

Accounting Skills Assessment Practice Exam Page 1 of 10

Accounting Skills Assessment Practice Exam Page 1 of 10 NAU ACCOUNTING SKILLS ASSESSMENT PRACTICE EXAM & KEY 1. A company received cash and issued common stock. What was the effect on the accounting equation? Assets Liabilities Stockholders Equity A. + NE +

More information

CHAPTER 8. Valuation of Inventories: A Cost-Basis Approach 1, 2, 3, 4, 5, 6, 8, 9. 2. Perpetual vs. periodic. 2 9, 13, 14, 17

CHAPTER 8. Valuation of Inventories: A Cost-Basis Approach 1, 2, 3, 4, 5, 6, 8, 9. 2. Perpetual vs. periodic. 2 9, 13, 14, 17 CHAPTER 8 Valuation of Inventories: A Cost-Basis Approach ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Inventory accounts; determining

More information

Module 3 - Inventory Definitions

Module 3 - Inventory Definitions Module 3 - Inventory Definitions Inventory goods held for resale COGS expenses incurred to purchase or manufacture the merchandise sold for a period Raw material Work-In-Process Finished Goods Inventory

More information

Chapter 6. Learning Objectives. Account for inventory by the FIFO, LIFO and average cost methods. Objective 1. Retail Inventory

Chapter 6. Learning Objectives. Account for inventory by the FIFO, LIFO and average cost methods. Objective 1. Retail Inventory PowerPoint to accompany Chapter 6 Retail Inventory Learning Objectives 1. Account for inventory by the FIFO, LIFO and average cost methods. 2. Compare the effects of FIFO, LIFO and average cost. 3. Apply

More information

CHAPTER 6 T E A C H E R V E R S I O N

CHAPTER 6 T E A C H E R V E R S I O N Inventories CHAPTER 6 T E A C H E R V E R S I O N Describe the importance of control over inventory. Control of Inventory LO 1 Two primary objectives of control over inventory are: 1. Safeguarding the

More information

Inventories: Cost Measurement and Flow Assumptions

Inventories: Cost Measurement and Flow Assumptions CHAPTER Inventories: Cost Measurement and Flow Assumptions OBJECTIVES After careful study of this chapter, you will be able to: 1. Describe how inventory accounts are classified. 2. Explain the uses of

More information

Merchandising Operations

Merchandising Operations 5 Merchandising Operations WHAT YOU PROBABLY ALREADY KNOW You want to order a pair of pants from a mail-order catalog. The price listed in the catalog is $50. There is a 10% off coupon in the catalog for

More information

Accounting. Chapter 22

Accounting. Chapter 22 Accounting Chapter 22 Merchandise inventory on hand is typically the largest asset of a merchandising business Cost of Merchandise inventory is reported on both the balance sheet and income statement The

More information

Accounts Receivable 7200 Sales 7200 (No entry )

Accounts Receivable 7200 Sales 7200 (No entry ) INVENTORY. Inventory: It is defined as tangible personal property: 1. Held for sale in the ordinary course of business. 2. In the process of production for such sale. 3. To be used currently in the production

More information

CHAPTER 6 INVENTORIES SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY. True-False Statements. Multiple Choice Questions

CHAPTER 6 INVENTORIES SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY. True-False Statements. Multiple Choice Questions CHAPTER 6 INVENTORIES SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM S TAXONOMY Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT True-False Statements 1. 1 C 8. 2 C 15. 3 K 2. 1 C 9. 2 C 16.

More information

Ch6. Student: 2. Cost of goods sold is an asset reported in the balance sheet and inventory is an expense reported in the income statement.

Ch6. Student: 2. Cost of goods sold is an asset reported in the balance sheet and inventory is an expense reported in the income statement. Ch6 Student: 1. Inventory is usually reported as a long-term asset in the balance sheet. 2. Cost of goods sold is an asset reported in the balance sheet and inventory is an expense reported in the income

More information

Chapter 9: Inventories. Raw materials and consumables Finished goods Work in Progress Variants of valuation at historical cost other valuation rules

Chapter 9: Inventories. Raw materials and consumables Finished goods Work in Progress Variants of valuation at historical cost other valuation rules Chapter 9: Inventories Raw materials and consumables Finished goods Work in Progress Variants of valuation at historical cost other valuation rules 1 Characteristics of Inventories belong to current assets

More information

Inventories. 2014 Level I Financial Reporting and Analysis. IFT Notes for the CFA exam

Inventories. 2014 Level I Financial Reporting and Analysis. IFT Notes for the CFA exam Inventories 2014 Level I Financial Reporting and Analysis IFT Notes for the CFA exam Contents 1. Introduction... 3 2. Cost of Inventories... 3 3. Inventory Valuation Methods... 4 4. Measurement of Inventory

More information

Income Statements. Accounting for Merchandising Operations

Income Statements. Accounting for Merchandising Operations Accounting Principles, 7 th Edition Weygandt Kieso Kimmel Income Statements Accounting for Merchandising Operations Prepared by Naomi Karolinski Monroe Community College and Marianne Bradford Bryant College

More information

Intermediate Accounting

Intermediate Accounting Intermediate Accounting Thomas H. Beechy Schulich School of Business, York University Joan E. D. Conrod Faculty of Management, Dalhousie University PowerPoint slides by: Bruce W. MacLean, Faculty of Management,

More information

2 Under a perpetual inventory system merchandise is purchased for cash. Which is the correct journal entry to record this purchase?

2 Under a perpetual inventory system merchandise is purchased for cash. Which is the correct journal entry to record this purchase? KRUG PRACTICE TEST ACCTG 1 - CHAP 5,6 PRACTICE TEST -- The following is a practice test for Accounting 1, Chapters 5 and 6 It is only a representation of wha the test could be like. It is not a guarantee

More information

Fundamentals of Financial Accounting

Fundamentals of Financial Accounting Fundamentals of Financial Accounting CHAPTER I Accounting in action. What is accounting? Accounting is the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting

More information

With 11,000 employees serving 2 million customers weekly,

With 11,000 employees serving 2 million customers weekly, Chapter 13 MARK LENNHIAN/AP PHOTO PHOTO: CARY BENBOW LEARNING OBJECTIVES Careful study of this chapter should enable you to: LO1 Explain the impact of merchandise inventory on the financial statements.

More information

Chapter 2: Debits and Credits. 2012 Educating Bookkeepers for Business, Inc.

Chapter 2: Debits and Credits. 2012 Educating Bookkeepers for Business, Inc. Chapter 2: Debits and Credits Think through and record transactions (write sentences) using T-accounts and journal entries. Debits and Credits Every transaction (sentence in the story of what happened

More information

For more course tutorials visit www.uoptutorial.com

For more course tutorials visit www.uoptutorial.com ACC 290 Final Exam Guide (New) Click Here to Buy the Tutorial http://www.uoptutorial.com/index.php?route=product/ product&path=737&product_id=11101 For more course tutorials visit www.uoptutorial.com ACC

More information

Jackson Company recorded the following cash transactions for the year:

Jackson Company recorded the following cash transactions for the year: ACC 290 Final Exam Guide (New) Click Here to Buy the Tutorial http://www.uoptutorial.com/index.php?route=product/product&path=7 37&product_id=11101 For more course tutorials visit www.uoptutorial.com ACC

More information

Accounting 303 Exam 3, Chapters 7-9 Fall 2012 Section Row

Accounting 303 Exam 3, Chapters 7-9 Fall 2012 Section Row Accounting 303 Name Exam 3, Chapters 7-9 Fall 2012 Section Row I. Multiple Choice Questions. (2 points each, 34 points in total) Read each question carefully and indicate your answer by circling the letter

More information

Equity The remainder is the shareholders claim on the assets-equity. It is often referred to as residual equity.

Equity The remainder is the shareholders claim on the assets-equity. It is often referred to as residual equity. ACT 1600 Fundamental of Financial Accounting Chapter 1 The Basic Accounting Equation Asset = Liabilities + Equity Asset Assets are resources a business owns. The common characteristic possessed by all

More information

Merchandise Accounts. Chapter 7 - Unit 14

Merchandise Accounts. Chapter 7 - Unit 14 Merchandise Accounts Chapter 7 - Unit 14 Merchandising... Merchandising... There are many types of companies out there Merchandising... There are many types of companies out there Service company - sells

More information

RAPID REVIEW Chapter Content

RAPID REVIEW Chapter Content RAPID REVIEW BASIC ACCOUNTING EQUATION (Chapter 2) INVENTORY (Chapters 5 and 6) Basic Equation Assets Owner s Equity Expanded Owner s Owner s Assets Equation = Liabilities Capital Drawing Revenues Debit

More information

Merchandise Inventory

Merchandise Inventory 6 Merchandise Inventory WHAT YOU PROBABLY ALREADY KNOW Assume that you want to invest in the stock market. You purchase 100 shares of a stock mutual fund in January at $24/share, another 100 shares in

More information

CHAPTER 8 Valuation of Inventories: A Cost Basis Approach

CHAPTER 8 Valuation of Inventories: A Cost Basis Approach CHAPTER 8 Valuation of Inventories: A Cost Basis Approach 8-1 LECTURE OUTLINE This chapter can be covered in three to four class sessions. Students should have had previous exposure to inventory accounting

More information

Accounting 303 Exam 3, Chapters 7-9

Accounting 303 Exam 3, Chapters 7-9 Accounting 303 Exam 3, Chapters 7-9 Spring 2012 Name Row I. Multiple Choice Questions. (2 points each, 30 points in total) Read each question carefully and indicate your answer by circling the letter preceding

More information

Assets=Liabilities + Owner s Equity. Owner s Equity= Owner s Capital (Investments) Drawings + Profit OR Loss

Assets=Liabilities + Owner s Equity. Owner s Equity= Owner s Capital (Investments) Drawings + Profit OR Loss Chapter 1~3 Important formulas Assets=Liabilities + Owner s Equity An expansion: Owner s Equity= Owner s Capital (Investments) Drawings + Profit OR Loss [Note: Owner s capital includes investments by the

More information

CHAPTER 6 ACQUISITIONS AND PAYMENT: INVENTORY AND LIABILITIES

CHAPTER 6 ACQUISITIONS AND PAYMENT: INVENTORY AND LIABILITIES CHAPTER 6 ACQUISITIONS AND PAYMENT: INVENTORY AND LIABILITIES Acquiring Merchandise for Sale Purchases (pp. 214-16) Purchase Discounts When a company takes advantage of a purchase discount, it reduces

More information

Chapter 8 Inventories: Measurement

Chapter 8 Inventories: Measurement Chapter 8 Inventories: Measurement AACSB assurance of learning standards in accounting and business education require documentation of outcomes assessment. Although schools, departments, and faculty may

More information

Inventories and Cost of Goods Sold

Inventories and Cost of Goods Sold C H A P T E R 9 Inventories and Cost of Goods Sold Merchandising companies buy and sell large quantities and varieties of goods. These activities lead to complex accounting problems in measuring profits.

More information

CHAPTER 9 WHAT IS REPORTED AS INVENTORY? WHAT IS INVENTORY? COST OF GOODS SOLD AND INVENTORY

CHAPTER 9 WHAT IS REPORTED AS INVENTORY? WHAT IS INVENTORY? COST OF GOODS SOLD AND INVENTORY CHAPTER 9 COST OF GOODS AND INVENTORY 1 WHAT IS REPORTED AS INVENTORY? Inventory represents goods that are either manufactured or purchased for resale in the normal course of business Inventory is classified

More information

Century 21 Accounting, 8e General Journal Chapter Outlines

Century 21 Accounting, 8e General Journal Chapter Outlines Century 21 Accounting, 8e General Journal Chapter Outlines PART 1 Chapter 1 ACCOUNTING FOR A SERVICE BUSINESS ORGANIZED AS A PROPRIETORSHIP Starting A Proprietorship: Changes that Affect the Accounting

More information

THEME: ACCOUNTING FOR INVENTORY

THEME: ACCOUNTING FOR INVENTORY THEME: ACCOUNTING FOR INVENTORY By John W. Day, MBA ACCOUNTING TERM: Inventory Inventory can be defined as goods being held for resale. In manufacturing, inventory can be raw materials, work-in-process,

More information

Accounting 101 you don t have to be an accountant to run MYOB Your Daily Lives Cash vs. Accrual Accounting

Accounting 101 you don t have to be an accountant to run MYOB Your Daily Lives Cash vs. Accrual Accounting MYOB US, Inc. April 2002 Accounting 101 Like all small business owners, you went into business with a dream: to sell your unique product or services and make a living for you, your family, and your employees.

More information

ACCT1115. Review Package - Midterm SOLUTION Fall 2013

ACCT1115. Review Package - Midterm SOLUTION Fall 2013 ACCT1115 Review Package - Midterm SOLUTION Fall 2013 Part I Multiple Choice 1) How should you record the purchase of an expensive automobile? a) Decrease cash, increase assets b) Decrease cash, increase

More information

CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS

CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS CHAPTER 5 ACCOUNTING FOR MERCHANDISING OPERATIONS LEARNING OBJECTIVES 1. IDENTIFY THE DIFFERENCES BETWEEN SERVICE AND MERCHANDISING COMPANIES. 2. EXPLAIN THE RECORDING OF PURCHASES UNDER A PERPETUAL INVENTORY

More information

Chapter 13 Financial Statements and Closing Procedures

Chapter 13 Financial Statements and Closing Procedures Chapter 13 - Financial Statements and Closing Procedures Chapter 13 Financial Statements and Closing Procedures TEACHING OBJECTIVES 13-1) Prepare a classified income statement from the worksheet. 13-2)

More information

Chapter 5 Merchandising Operations

Chapter 5 Merchandising Operations Chapter 5 Merchandising Operations Financial Statements of a Service Company and a Merchandiser: - Service Companies: Revenues earned through performance of services. Examples: Dentists, Accounting Firms,

More information

ACCOUNTING DICTIONARY

ACCOUNTING DICTIONARY ACCOUNTING DICTIONARY A Account a record summarizing all the information pertaining to a single item in the accounting equation Account balance the amount in an account Account number the number assigned

More information

Accounting 1. Lesson Plan. Topic: Accounting for Inventory Unit: 4 Chapter 23

Accounting 1. Lesson Plan. Topic: Accounting for Inventory Unit: 4 Chapter 23 Accounting 1 Lesson Plan Name: Terry Wilhelmi Day/Date: Topic: Accounting for Inventory Unit: 4 Chapter 23 I. Objective(s): By the end of today s lesson, the student will be able to: define accounting

More information

Prepared by Coby Harmon University of California, Santa Barbara Westmont College

Prepared by Coby Harmon University of California, Santa Barbara Westmont College 6-1 Prepared by Coby Harmon University of California, Santa Barbara Westmont College 6 Inventories Learning Objectives After studying this chapter, you should be able to: [1] Determine how to classify

More information

Financial Accounting. (Exam)

Financial Accounting. (Exam) Financial Accounting (Exam) Your AccountingCoach PRO membership includes lifetime access to all of our materials Take a quick tour by visiting wwwaccountingcoachcom/quicktour Table of Contents (click to

More information

Learning Objectives: Quick answer key: Question # Multiple Choice True/False. 14.1 Describe the important of accounting and financial information.

Learning Objectives: Quick answer key: Question # Multiple Choice True/False. 14.1 Describe the important of accounting and financial information. 0 Learning Objectives: 14.1 Describe the important of accounting and financial information. 14.2 Differentiate between managerial and financial accounting. 14.3 Identify the six steps of the accounting

More information

Advanced Accounting. Chapter 4: Financial Reporting for a Departmentalized Business

Advanced Accounting. Chapter 4: Financial Reporting for a Departmentalized Business Advanced Accounting Chapter 4: Financial Reporting for a Departmentalized Business Financial statements are used to summarize financial info and then are used to evaluate the financial position and progress

More information

SOLUTIONS. Learning Goal 22 LG 22-1. LG 22-2.

SOLUTIONS. Learning Goal 22 LG 22-1. LG 22-2. S1 Learning Goal 22 Multiple Choice 1. b 2. d A purchase discount is recorded when payment is made. 3. a The payment is within the discount period, so $5,000.02 = $100. 4. b The discount is ($1,000/.98)

More information

Click to edit Master title style. Inventories

Click to edit Master title style. Inventories 1 7 Inventories 1 2 After studying this chapter, you should be able to: 1. Describe the importance of control over inventory. 2. Describe three inventory cost flow assumptions and how they impact the income

More information

Chapter 5 Accounting for Merchandising Operations

Chapter 5 Accounting for Merchandising Operations Chapter 5 Accounting for Merchandising Operations Purchase Transactions Purchaser records goods at cost. When goods are returned, purchaser reduces Inventory. On September 5, De La Hoya Company buys merchandise

More information

Accumulated Depreciation Equipment

Accumulated Depreciation Equipment Chapter 4 Completing the Accounting Cycle > DO IT! Worksheet Balance sheet: Extend assets to debit column. Extend liabilities to credit column. Extend contra assets to credit column. Extend drawings account

More information

SECTION IX. ACCOUNTING FOR INVENTORY

SECTION IX. ACCOUNTING FOR INVENTORY SECTION IX. ACCOUNTING FOR INVENTORY A. IAS 2 IAS 2 Inventories pertains to inventories that are: Assets held for sale in the ordinary course of business (finished goods and merchandise); Assets in the

More information

ACCOUNTING 105 CONCEPTS REVIEW

ACCOUNTING 105 CONCEPTS REVIEW ACCOUNTING 105 CONCEPTS REVIEW A note from the tutors: This handout is designed to help you review important information as you study for your cumulative final exam. While it does cover many important

More information

UIL ACCOUNTING REGIONAL 2011-R

UIL ACCOUNTING REGIONAL 2011-R GROUP 1 UIL ACCOUNTING REGIONAL 2011-R A--Current Asset--Assets that are either used up or converted to cash during the normal operating cycle of the business, usually 1 year. B--Plant Asset--Long-lived

More information

ANSWERS TO QUESTIONS FOR GROUP LEARNING

ANSWERS TO QUESTIONS FOR GROUP LEARNING Accounting for a 5 Merchandising Business ANSWERS TO QUESTIONS FOR GROUP LEARNING Q5-1 A merchandising business has a major revenue reduction called cost of goods sold. The computation of cost of goods

More information

Accounting 303 Exam 3, Chapters 7-9 Fall 2013 Section Row

Accounting 303 Exam 3, Chapters 7-9 Fall 2013 Section Row Accounting 303 Name Exam 3, Chapters 7-9 Fall 2013 Section Row I. Multiple Choice Questions. (2 points each, 28 points in total) Read each question carefully and indicate your answer by circling the letter

More information

CHAPTER 6. Accounting for retailing CONTENTS

CHAPTER 6. Accounting for retailing CONTENTS CHAPTER 6 Accounting for retailing CONTENTS 6.1 Journal entries periodic inventory system 6.2 Journal entries involving discounts, closing entries and statements of financial performance both perpetual

More information

CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives

CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives CENTURY 21 ACCOUNTING, 8e General Journal Chapter Objectives Chapter 1 Starting A Proprietorship: Changes that Affect the Accounting Equation After studying Chapter 1, you will be able to: 1. Define accounting

More information

Tutoring Monk. Exam 3 Notes Chapter 6

Tutoring Monk. Exam 3 Notes Chapter 6 Tutoring Monk Have No Fear, The Monks Are Here Exam 3 Notes Chapter 6 To supplement these notes, please watch the videos FIRST. Video Access: http://www.accounting1.tutoringmonk.com Chapter 6 Please refer

More information

Ending inventory: Ending Inventory = Goods available for sale Cost of goods sold Ending Inventory = $16,392 - $13,379 Ending Inventory = $3,013

Ending inventory: Ending Inventory = Goods available for sale Cost of goods sold Ending Inventory = $16,392 - $13,379 Ending Inventory = $3,013 BE7 1 CHAPTER 7 MERCHANDISE INVENTORY BRIEF EXERCISES The inventory purchases made by Hewlett-Packard during 2008 can be calculated as follows: Beginning inventory $ 8.0 billion + Purchases X Cost of Goods

More information

Lesson 5: Inventory. 5.1 Introduction. 5.2 Manufacturer or Retailer?

Lesson 5: Inventory. 5.1 Introduction. 5.2 Manufacturer or Retailer? Lesson 5: Inventory 5.1 Introduction Whether it is a brick and mortar or digital store, for many businesses, inventory management is a key cog of their operations. Managing inventory is an important key

More information

b. Do not recognize revenue until steel is shipped. c. Do not recognize revenue until next year after the games are played.

b. Do not recognize revenue until steel is shipped. c. Do not recognize revenue until next year after the games are played. CHAPTER FOUR SE4-2 Revenue recognition a. Recognize revenue from car sales for 12,000. Notes receivable $12,000 Sales revenue $12,000 b. Do not recognize revenue until steel is shipped. c. Do not recognize

More information

Multiple-Choice Questions

Multiple-Choice Questions True-False 1 Periodic inventory systems provide a greater degree of management control over inventory. 2 In the perpetual inventory system inventory losses must be recoded in the accounts. 3 In a periodic

More information

CHAPTER 6. Inventories ASSIGNMENT CLASSIFICATION TABLE. B Problems. A Problems. Brief Exercises Do It! Exercises

CHAPTER 6. Inventories ASSIGNMENT CLASSIFICATION TABLE. B Problems. A Problems. Brief Exercises Do It! Exercises CHAPTER 6 Inventories ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Do It! Exercises A Problems B Problems 1. Describe the steps in determining inventory quantities. 1, 2,

More information

ACS-1803 Introduction to Information Systems. Functional Area Systems. Lecture 4

ACS-1803 Introduction to Information Systems. Functional Area Systems. Lecture 4 ACS-1803 Introduction to Information Systems Instructor: David Tenjo Functional Area Systems Lecture 4 1 Overview Overview of Functional Areas in the organization Functional Area: Accounting Accounting

More information

William B. Pollard, Appalachian State University, Boone, NC 28608, pollardwb@appstate.edu INTRODUCTION

William B. Pollard, Appalachian State University, Boone, NC 28608, pollardwb@appstate.edu INTRODUCTION TEACHING PRINCIPLES OF ACCOUNTING: HELPING STUDENTS IDENTIFY TEN DIFFERENCES WHEN COMPARING A TRIAL BALANCE, AN ADJUSTED TRIAL BALANCE AND A BALANCE SHEET William B. Pollard, Appalachian State University,

More information

CHAPTER 5. Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE. Brief. B Problems. A Problems 2, 3, 4 1 1

CHAPTER 5. Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE. Brief. B Problems. A Problems 2, 3, 4 1 1 CHAPTER 5 Accounting for Merchandising Operations ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems *1. Identify the differences between service

More information

Financial Statements for a Corporation

Financial Statements for a Corporation CHAPTER 19 Financial Statements for a Corporation BEFORE YOU READ 1. 2. 3. 4. 5. 6. What You ll Learn Explain how to record ownership of a corporation. Explain the relationship between the work sheet and

More information

Chapter 6 Statement of Cash Flows

Chapter 6 Statement of Cash Flows Chapter 6 Statement of Cash Flows The Statement of Cash Flows describes the cash inflows and outflows for the firm based upon three categories of activities. Operating Activities: Generally include transactions

More information

* * * Chapter 15 Accounting & Financial Statements. Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall

* * * Chapter 15 Accounting & Financial Statements. Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall Chapter 15 Accounting & Financial Statements Copyright 2013 Pearson Education, Inc. publishing as Prentice Hall Bookkeeping vs. Accounting Bookkeeping Accounting The recording of business transactions.

More information

CENTURY 21 ACCOUNTING, 8e General Journal Key Terms and Definitions

CENTURY 21 ACCOUNTING, 8e General Journal Key Terms and Definitions CENTURY 21 ACCOUNTING, 8e General Journal Key Terms and Definitions Chapter 1 Starting A Proprietorship: Changes that Affect the Accounting Equation account: a record summarizing all the information pertaining

More information

CHAPTER 8 VALUATION OF INVENTORIES: A COST BASIS APPROACH. MULTIPLE CHOICE Conceptual

CHAPTER 8 VALUATION OF INVENTORIES: A COST BASIS APPROACH. MULTIPLE CHOICE Conceptual CHAPTER 8 VALUATION OF INVENTORIES: A COST BASIS APPROACH Answer No. Description MULTIPLE CHOICE Conceptual d 1. Entries under perpetual inventory system. b 2. Classification of goods in transit. a 3.

More information

1. Analyze the following T-account in the ledger of Moxy Pool Supply Company

1. Analyze the following T-account in the ledger of Moxy Pool Supply Company Name: Date: 1. Analyze the following T-account in the ledger of Moxy Pool Supply Company Mdse. Inventory 5,000 400 If $5,000 in the Inventory account represents merchandise purchased from a supplier, we

More information

Self-test Comprehensive Problems II 综 合 自 测 题 II

Self-test Comprehensive Problems II 综 合 自 测 题 II Self-test Comprehensive Problems II 综 合 自 测 题 II Part One (30%) 1. Give the Chinese/English of the following terms: (5%) subsidiary ledger 统 制 账 户 purchase requisition 现 金 溢 缺 petty cash fund 永 续 盘 存 制

More information

Module 9.1 Accounting, Costing and ERP

Module 9.1 Accounting, Costing and ERP Module 9.1 Accounting, Costing and ERP By Wipawii Jaraswarapan Business Consultant, ecosoft wipawii@gmail.com ADempiere ERP 1 2 Module Objectives Business vs Accounting vs ERP Accounting and Costing fundamental

More information

CHAPTER 3 ADJUSTING THE ACCOUNTS

CHAPTER 3 ADJUSTING THE ACCOUNTS CHAPTER 3 ADJUSTING THE ACCOUNTS TIME PERIOD ASSUMPTION The time period (or periodicity) assumption assumes that the economic life of a business can be divided into artificial time periods generally a

More information

1. A set of procedures for controlling cash payments by preparing and approving vouchers before payments are made is known as a voucher system.

1. A set of procedures for controlling cash payments by preparing and approving vouchers before payments are made is known as a voucher system. Accounting II True/False Indicate whether the sentence or statement is true or false. 1. A set of procedures for controlling cash payments by preparing and approving vouchers before payments are made is

More information