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

Size: px
Start display at page:

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

Transcription

1 Week 9/ 10, Chap7 Accounting 1A, Financial Accounting Reporting and Interpreting Cost of Goods Sold and Inventory Instructor: Michael Booth

2 Understanding the Business Primary Goals of Inventory Management Provide sufficient quantities of highquality inventory. Minimize the costs of carrying inventory.

3 Apply the cost principle to identify the amounts included in inventory matching principle to determine cost of goods

4 Items Included in Inventory Inventory Work in Process or In-transit Held for Re-Sale Raw Material:Used to Produce Goods or Services Merchandise Inventory Raw Materials Inventory Work in Process Inventory Finished Goods Inventory

5 Costs Included in Inventory Purchases The cost principle requires that inventory be recorded at the price paid or the consideration given. Invoice Price Freight Inspection Costs Preparation Costs

6 Flow of Inventory Costs Merchandiser Merchandise Purchases Merchandise Inventory Cost of Goods Sold Manufacturer Raw Materials Raw Materials Inventory Work in Process Inventory Finished Goods Inventory Direct Labor Factory Overhead Cost of Goods Sold

7 Nature of Cost of Goods Sold Beginning Inventory Purchases for the Period Goods available for Sale Ending Inventory (Balance Sheet) Cost of Goods Sold (Income Statement) Beginning inventory + Purchases = Goods Available for Sale Goods Available for Sale Ending inventory = Cost of goods sold

8 Report inventory and cost of goods sold using the four inventory costing methods. 1. LIFO 2. FIFO 3. Specific Identification 4. Weighted Average

9 Inventory Costing Methods Specific Identification FIFO LIFO Weighted Average

10 Inventory Costing Methods Total Dollar Amount of Goods Available for Sale Inventory Costing Method Ending Inventory Cost of Goods Sold

11 Specific Identification When units are sold, the specific Car Dealership cost of the unit sold is added to cost of goods sold. Custom homes

12 Cost Flow Assumptions The choice of an inventory costing method is not based on the physical flow of goods on and off the shelves.

13 First-In, First-Out Method (FIFO) Oldest Costs Cost of Goods Sold Prior price for material purchased Recent Costs Ending Inventory Most recent price for material purchased

14 Computers, Inc. First-In, Mouse First-Out Pad Inventory Date Units $/Unit Total Beginning Inventory 1,000 $ 5.25 $ 5, Purchases: Jan , June , Sept , Nov , Goods Available for Sale 2,250 $ 12, Ending Inventory 1,200? Cost of Goods Sold 1,050? Remember: The costs of most recent purchases are in ending inventory. Start with 11/29 and add units purchased until you reach the number in ending inventory.

15 First-In, First-Out Given Information Ending Inventory Cost of Goods Sold Beg. Inv. $ 5.25 Jan June Sept Nov $ Units Units

16 First-In, First-Out Cost of Goods Given Information Ending Inventory Sold Beg. Inv. $ 5.25 Jan $5.30 June $5.60 Sept $5.80 Nov $5.90 1,200 Units Units $ 6,695 Cost Now, we have allocated the cost to all 1,200 units in ending inventory.

17 First-In, First-Out Cost of Goods Given Information Ending Inventory Sold Beg. Inv. $ 5.25 $ 5.25 Jan $ June $5.60 Sept $5.80 Nov $5.90 1,200 Units 1,050 Units $ 6,695 Cost $ 5,515 Cost Now, we have allocated the cost to all 1,050 units sold.

18 Cost of Goods Sold 1,050 $ 5, First-In, Computers, First-Out Inc. Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 1,000 $ 5.25 $ 5, Purchases: Jan , June , Sept , Nov , Goods Available for Sale 2,250 $ 12, Ending Inventory 1,200 $ 6, Here is the cost of ending inventory and cost of goods sold using FIFO.

19 First-In, First-Out Method (FIFO) Oldest Costs Cost of Goods Sold Prior price for material purchased Recent Costs Ending Inventory Most recent price for material purchased

20 In Class Exercise (AP7-1, page 374) Do one task at a time After the completion of Task 2 (FIFO), we will review how to calculate

21 In Class Exercise AP 7-1(FIFO) Transactions Units Unit Cost Total Cost Beginning Inventory Purchase, Feb 20 Purchase, June 30 Sale ($50 ea) 70 Sale ($50 ea) $32 $12, $23, $17,020

22 In Class Exercise AP 7-1 (FIFO) Transactions Units Unit Cost Total Cost Beginning Inventory Purchase, Feb 20 Purchase, June 30 Goods Available for Sale 390 $32 $12, $23, $17,020 1,550 $53,300

23 First-in, First out (FIFO) COGS 390 x $32 = $12, x $34 = $14,620 Total = $27,100 Ending Inventory 270 x $34 =$9, x $37 =$17,020 Total = $26,200

24 First-In, First-Out Method (FIFO) Oldest Costs Cost of Goods Sold Prior price for material purchased Recent Costs Ending Inventory Most recent price for material purchased

25 Last-In, First-Out Method (LIFO) Oldest Costs Ending Inventory Prior price for material purchased Recent Costs Cost of Goods Sold Most recent price for material purchased

26 Cost of Goods Sold 1,050? Last-In, Computers, First-Out Inc. Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 1,000 $ 5.25 $ 5, Purchases: Jan , June , Sept , Nov , Goods Available for Sale 2,250 $ 12, Ending Inventory 1,200? Remember: The costs of the oldest purchases are in ending inventory. Start with beginning inventory and add units purchased until you reach the number in ending inventory.

27 Last-In, First-Out(LIFO) Cost of Goods Given Information Ending Inventory Sold Beg. Inv. $ 5.25 Jan $ 5.30 June Sept Nov ,050 Units $ 5,900 Cost Now, we have allocated the cost to all 1,050 units sold.

28 Last-In, First-Out(LIFO) Cost of Goods Given Information Ending Inventory Sold Beg. Inv. $ 5.25 Jan $ 5.30 June Sept Nov ,200 Units 1,050 Units Now, allocate the cost to to remaining inventory units $ 5,900 Cost

29 Last-In, First-Out(LIFO) Cost of Goods Given Information Ending Inventory Sold Beg. Inv. $ 5.25 $5.25 Jan $ 5.30 June Sept Nov ,200 Units 1,050 Units $ 6,310 Cost $ 5,900 Cost Now, allocate the cost to to remaining 1,200 inventory units

30 Cost of Goods Sold 1,050 $ 5, Last-In, Computers, First-Out Inc. Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 1,000 $ 5.25 $ 5, Purchases: Jan , June , Sept , Nov , Goods Available for Sale 2,250 $ 12, Here is the cost of ending inventory and cost of goods sold using LIFO. Ending Inventory 1,200 $ 6,310.00

31 In Class Exercise (AP7-1, page 379) Do one task at a time After the completion of Task 3(LIFO), we will review how to calculate

32 In Class Exercise AP 7-1(LIFO) Transactions Units Unit Cost Total Cost Beginning Inventory Purchase, Feb 20 Purchase, June 30 Sale ($50 ea) 70 Sale ($50 ea) $32 $12, $23, $17,020

33 In Class Exercise AP 7-1(LIFO) Transactions Units Unit Cost Total Cost Beginning Inventory Purchase, Feb 20 Purchase, June 30 Goods Available for Sale 390 $32 $12, $23, $17,020 1,500 $53,300

34 Last-in, First out (LIFO) COGS 460 x $37 = $17, x $34 = $12,240 Total = $29,260 Ending Inventory 340 x $34 =$11, x $32 =$12,480 Total = $24,040

35 Inventory Costing Methods Specific Identification FIFO Matches Market cost for goods sold LIFO Matches market cost for Merchandise Inv. Weighted Average

36 Average Cost Method When a unit is sold, the average cost of each unit in inventory is assigned to cost of goods sold. Cost of Goods Available for Sale Number of Units Available for Sale COGS

37 Cost of Goods Sold 1,050 Average Computers, Cost Inc. Method Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 1,000 $ 5.25 $ 5, Purchases: Jan , June , Sept , Nov , Goods Available for Sale 2,250 $ 12, Weighted Average Cost $ 12,210 2,250 = $ Ending Inventory 1,200

38 Average Computers, Cost Inc. Method Mouse Pad Inventory Date Units $/Unit Total Beginning Inventory 1,000 $ 5.25 $ 5, Purchases: Jan , June , Sept , Nov , Goods Available for Sale 2,250 $ 12, Ending Inventory 1,200 $ 6, Cost of Goods Sold 1,050 $ 5, Weighted Average Cost $ 12,210 2,250 = $ ,200 $ ,050 $

39 In Class Exercise (AP7-1, page 379) Do one task at a time After the completion of Task 1(Weighted Average), we will review how to calculate

40 In Class Exercise AP 7-1(Weighted Average) Transactions Units Unit Cost Total Cost Beginning Inventory Purchase, Feb 20 Purchase, June 30 Sale ($50 ea) 70 Sale ($50 ea) $32 $12, $23, $17,020

41 In Class Exercise AP 7-1 (Weighted Average) Transactions Units Unit Cost Total Cost Beginning Inventory Purchase, Feb 20 Purchase, June 30 Goods Available for Sale 390 $32 $12, $23, $17,020 1,550 $53,300

42 Weighted Average Goods Available Sale/ Total Units $53,300/1,550 = $34.39 per unit Ending inventory $53,300 (820 * $34.39) = $25,100 COGS (820 * $34.39) = $28,200

43 Comparison of Methods Computers, Inc. Income Statement For Year Ended December 31, 2006 FIFO LIFO Weighted Average Net sales $ 25,000 $ 25,000 $ 25,000 Cost of goods sold: Merchandise inventory, beginning $ 5,250 $ 5,250 $ 5,250 Net purchases 6,960 6,960 6,960 Goods available for sale $ 12,210 $ 12,210 $ 12,210 Merchandise inventory, ending 6,695 6,310 6,512 Cost of goods sold $ 5,515 $ 5,900 $ 5,698 Gross profit $ 19,485 $ 19,100 $ 19,302 Operating expenses Income before taxes $ 18,735 $ 18,350 $ 18,552 Income taxes expense (30%)* 5,621 5,505 5,566 Net income $ 13,114 $ 12,845 $ 12,986 For period of rising prices

44 In Class Exercise AP 7-1(Specific Identification) Transactions Units Unit Cost Total Cost Beginning Inventory Purchase, Feb 20 Purchase, June 30 Sale ($50 ea) 70 Sale ($50 ea) $32 $12, $23, $17,020

45 In Class Exercise AP 7-1(Specific Identification) Transactions Units Unit Cost Total Cost Beginning Inventory Purchase, Feb 20 Purchase, June 30 Goods Available for Sale 390 $32 $12, $23, $17,020 1,500 $53,300

46 Specific Identification COGS 70 * 2/5 = 28 units Beginning Inv = = 362 units 42 units Feb 20 Purchase = = 658 units units (remaining beginning) = 388 units 388 units from June 30 Purchase COGS = 390 *$32 = $12, * $34 = $ 1, * $37 = $14,356 Total = $28,264 Ending Inventory $53,300 - $28,264 = $25,036

47 Financial Statement Effects of Costing Methods Advantages of Methods First-In, First-Out Last-In, First-Out Weighted Average Ending inventory approximates current replacement cost. Better matches current costs in cost of goods sold with revenues. Smoothes out price changes.

48 When the use of different inventory costing methods is beneficial to a company.

49 Managers Choice of Inventory Methods Net Income Effects Managers prefer to report higher earnings for their companies. Income Tax Effects Managers prefer to pay the least amount of taxes allowed by law as late as possible.

50 Choosing Inventory Costing Methods If... Then... LIFO Conformity LIFO for taxes Rule LIFO for books

51 Report inventory at the lower of cost or market (LCM).

52 Valuation at Lower of Cost or Market Ending inventory is reported at the lower of cost or market (LCM). Replacement Cost The current purchase price for identical goods. The company will recognize a holding loss in the current period rather than the period in which the item is sold. This practice is conservative.

53 Valuation at Lower of Cost or Market Item Quantity Cost Replacement Cost LCM Total LCM Intel 9 Series Chips 1,000 $ 250 $ 200 $ 200 $ 200,000 1 TB Disk drives ,000 GENERAL JOURNAL Date Description Debit Credit Cost of goods sold 50,000 Inventory 50,000 Inventory cost= 1,000 x $250 = $250,000 LCM Adjustment = $250,000 - $200,000 = $50,000

54 Inventory management: The inventory turnover ratio Effects of inventory on cash flows.

55 Inventory Turnover Inventory Turnover = Cost of Goods Sold Average Inventory Average Inventory is... (Beginning Inventory + Ending Inventory) 2 This ratio reflects how many times average inventory was produced and sold during the period. A higher ratio indicates that inventory moves more quickly thus reducing storage and obsolescence costs.

56 Inventory and Cash Flows Subtract Increase in Inventory Decrease in Accounts Payable Cost of Goods Sold Cash Payment to Suppliers Add Decrease in Inventory Increase in Accounts Payable

57 Compare companies that use different inventory costing methods.

58 Inventory Methods and Financial Statement Analysis U.S. public companies using LIFO also report beginning and ending inventory on a FIFO basis if the FIFO values are materially different. Beginning inventory FIFO - Beginning inventory LIFO Beginning LIFO Reserve (Excess of FIFO over LIFO) Ending inventory FIFO - Ending inventory LIFO Ending LIFO Reserve (Excess of FIFO over LIFO) Beginning LIFO Reserve - Ending LIFO Reserve Difference in COGS Under FIFO

59 LIFO and International Comparisons No LIFO Permitted? Yes Singapore China Canada Australia Great Britain

60 Understand methods for controlling and keeping track of inventory and analyze the effects of inventory errors on financial statements.

61 Internal Control of Inventory Separation of inventory accounting and physical handling of inventory. Storage in a manner that protects from theft and damage. Limiting access to authorized employees. Maintaining perpetual inventory records. Comparing perpetual records to periodic physical counts.

62 Perpetual and Periodic Inventory Systems Perpetual System Provides up-to-date inventory records. Detailed inventory record Purchase transctions are direct to Inv Each sales is matched directly with COGS; decressing inventory and posting COGS Provides up-to-date cost of sales records. In a periodic inventory system, ending inventory and cost of goods sold are determined at the end of the accounting period based on a physical count.

63 Perpetual and Periodic Inventory Systems Inventory System Item Beginning Inventory Add: Purchases Less: Ending Inventory Cost of Goods Sold Periodic System Perpetual System Carried over from prior period Accumulated in the Purchases account Measured at end of period by physical inventory count Computed as a residual amount at end of period Carried over from prior period Accumulated in the Inventory account Perpetual record updated at every sale Measured at every sale based on perpetual record

64 Errors in Measuring Ending Inventory Errors in Measuring Inventory Ending Inventory Beginning Inventory Effect on Current Period's Balance Sheet Overstated Understated Overstated Understated Ending Inventory + - N/A N/A Retained Earnings Effect on n Current Period's Income Statement Goods Available for Sale N/A N/A + - Cost of Goods Sold Gross Profit Net Income

65 Additional Issues in Measuring Purchases

66 Purchase Returns and Allowances Purchase returns and allowances are a reduction in the cost of purchases associated with unsatisfactory goods. Returned goods require a reduction in the cost of inventory purchases and the recording of a cash refund or a reduction in the liability to the vendor.

67 Purchase Discounts A purchase discount is a cash discount received for prompt payment of an account. Terms Time Due Discount Period Full amount less discount Credit Period Full amount due Purchase or Sale

68 Purchase Discounts 2/10,n/30 Discount Percent Number of Days Discount Is Available Otherwise, Net (or All) Is Due Credit Period

69 Purchase Discounts Purchases paid for within the discount period reduce the Inventory account for the amount of the cash discount received.

70 Comparison of Perpetual and Periodic Inventory Systems

71 Perpetual Inventory System Jan. 1 Had beginning inventory of 800 units at a unit cost of $50. Apr. 14 Purchased 1,100 units at a unit cost of $50. Inventory 55,000 Accounts payable 55,000 Nov. 30 Sold 1,300 units at a sales price of $83. Accounts receivable 107,900 Sales revenue 107,900 Cost of goods sold 65,000 Inventory 65,000 Dec. 31 Use cost of goods sold and inventory amounts.

72 Periodic Inventory System Jan. 1 Had beginning inventory of 800 units at a unit cost of $50. Apr. 14 Purchased 1,100 units at a unit cost of $50. Purchases 55,000 Accounts payable 55,000 Nov. 30 Sold 1,300 units at a sales price of $83. Accounts receivable 107,900 Sales revenue 107,900 Dec. 31 Count the number of units on hand. Compute the dollar valuation of the ending inventory. Compute and record the cost of goods sold. Inventory (beginning) 40,000 Purchases 55,000 Total Inventory Available for Sale 95,000 Inventory (ending) (30,000) Cost of goods sold 65,000

73 Assignments: See web: http//cabrillo.blackboard.edu This will be updated weekly as required Update your weekly journal for the Final Journal Work weekly on your final project, do the analysis with information learned during the week

74 Weighted Average Goods Available Sale/ Total Units $53,300/1,550 = $34.39 per unit Ending inventory $53,300 (820 * $34.39) = $25,100 COGS (820 * $34.39) = $28,200

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

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

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

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

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 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

EXERCISES. Ex. 6 1. Ex. 6 2

EXERCISES. Ex. 6 1. Ex. 6 2 EXERCISES Ex. 6 1 Switching to a perpetual inventory system will strengthen A4A Hardware s internal controls over inventory, since the store managers will be able to keep track of how much of each item

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

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

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

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

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

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

Tax Accounting: Valuation of Inventories: A Cost Basis Approach under GAAP

Tax Accounting: Valuation of Inventories: A Cost Basis Approach under GAAP Tax Accounting: Valuation of Inventories: A Cost Basis Approach under GAAP Adopted in part from Kieso, Weygandt, and Warfield s Intermediate Accounting and Originally prepared by Jep Robertson and Renae

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

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 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

of Goods Sold and Inventory

of Goods Sold and Inventory Date: 10th July 2008 Time: 12:03 User ID: narayanansa 6 Cost of Goods Sold and Inventory After studying Chapter 6, you should be able to: ä 1 ä 2 ä 3 ä 4 ä 5 ä 6 ä 7 ä 8 ä 9 Describe the types of inventories

More information

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

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

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

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

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

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

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

Inventories: Cost Measurement and Flow Assumptions

Inventories: Cost Measurement and Flow Assumptions CHAPTER 8 O BJECTIVES After reading this chapter, you will be able to: 1 Describe how inventory accounts are classified. 2 Explain the uses of the perpetual and periodic inventory systems. 3 Identify how

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

2. A service company earns net income by buying and selling merchandise. Ans: False

2. A service company earns net income by buying and selling merchandise. Ans: False Chapter 6: Accounting For Merchandising Activities True/False 1. Merchandise consists of products that a company acquires for the purpose of reselling them to customers. 2. A service company earns net

More information

Cost flow assumptions: a framework for Inventory analysis

Cost flow assumptions: a framework for Inventory analysis Cost flow assumptions: a framework for Inventory analysis The problem is which cost or costs should be assigned to the 6,000 units of ending inventory and the 4,000 units sold. The solution depends on

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

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

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

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

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

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

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

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

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

Chapter 8 Topic 1. Chapter 8: Topic 1 Valuation of Inventories The Basics. Student Learning Outcomes. Inventories: Financial Analysis

Chapter 8 Topic 1. Chapter 8: Topic 1 Valuation of Inventories The Basics. Student Learning Outcomes. Inventories: Financial Analysis Chapter 8: Topic 1 Valuation of Inventories The Basics Dr. Chula King ACG 3101 Student Learning Outcomes Perpetual versus periodic inventory system Effects of inventory errors Items to include in inventory

More information

SOLUTIONS. Learning Goal 27

SOLUTIONS. Learning Goal 27 Learning Goal 27: Record, Report, and Control Merchandise Inventory S1 Learning Goal 27 Multiple Choice 1. c FIFO puts the oldest costs into cost of goods sold and in a period of rising prices the oldest

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

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

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

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

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

MATH WORK SHEET CHAPTER 4

MATH WORK SHEET CHAPTER 4 1 Name Date Class CHAPTER 4 Calculating New Account Balances Calculate and record the new balance for each of the following accounts. ACCOUNT Cash ACCOUNT NO. 110.... 1, 200.00.. 3,900.00.... 1,755.00

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

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

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

CHAPTER 9 INVENTORIES: ADDITIONAL VALUATION ISSUES. MULTIPLE CHOICE Conceptual

CHAPTER 9 INVENTORIES: ADDITIONAL VALUATION ISSUES. MULTIPLE CHOICE Conceptual CHAPTER 9 INVENTORIES: ADDITIONAL VALUATION ISSUES Answer No. Description MULTIPLE CHOICE Conceptual d 1. Knowledge of lower of cost or market valuations. d 2. Appropriate use of LCM valuation. c 3. Definition

More information

Dr. M.D. Chase Accounting Principles Examination 2J Page 1

Dr. M.D. Chase Accounting Principles Examination 2J Page 1 Accounting Principles Examination 2J Page 1 Code 1 1. The term "net sales" refers to gross sales revenue reduced by sales discounts and transportation-in. 2. The cost of goods available for sale in a given

More information

Accounting for a Merchandising Business

Accounting for a Merchandising Business CHAPTER 10 Accounting for a Merchandising Business SECTION 10.1 REVIEW QUESTIONS (page 401) 1. A service business sells a service to the general public but does not deal in merchandise. For example, a

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

Principlesofaccounting.com

Principlesofaccounting.com Principlesofaccounting.com chapter 8 Inventory Your goals for this inventory chapter are to learn about: The correct components to include in inventory. Inventory costing methods, including specific identification,

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

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

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

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

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

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

Accounting for a Merchandising Business

Accounting for a Merchandising Business Chapter 11 Accounting for a Merchandising Business ANSWERS TO SECTION 11.1 REVIEW QUESTIONS (text p. 428) The Merchandising Business 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 1. 2. 3. 4. 14. 15. Copyright

More information

Accounting for inventory. www.brightpearl.com

Accounting for inventory. www.brightpearl.com Accounting for inventory Whats inside Accounting for your inventory is as important as accounting for your sales. Every product you have on the shelf has a cost value, and the total cost of goods is likely

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

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

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 Inventories 高立翰

Chapter 6 Inventories 高立翰 Chapter 6 Inventories 高立翰 Study Objectives 1. Describe the steps in determining inventory quantities. 2. Explain the accounting for inventories and apply the inventory cost flow methods. 3. Explain the

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

Purchasing/Human Resources/Payment Process: Recording and Evaluating Expenditure Process Activities

Purchasing/Human Resources/Payment Process: Recording and Evaluating Expenditure Process Activities Chapter 8 Purchasing/Human Resources/Payment Process: Recording and Evaluating Expenditure Process Activities McGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved. What

More information

Analysis of Inventories. Inventory: Asset or Expense?

Analysis of Inventories. Inventory: Asset or Expense? Analysis of Inventories Inventory: Asset or Expense? Inventories normally considered assets held for sale Comprised of: Raw materials inventory Work-in-process inventory Finished goods inventory Question:

More information

Inventory - A current asset whose ending balance should report the cost of a merchandiser's products waiting to be sold.

Inventory - A current asset whose ending balance should report the cost of a merchandiser's products waiting to be sold. Accounting Fundamentals Lesson 6 6.0 Inventory & Cost of Sales Inventory - A current asset whose ending balance should report the cost of a merchandiser's products waiting to be sold. The inventory of

More information

CHAPTER 8 INVENTORIES AND THE COST OF GOODS SOLD

CHAPTER 8 INVENTORIES AND THE COST OF GOODS SOLD CHAPTER 8 INVENTORIES AND THE COST OF GOODS SOLD OVERVIEW OF BRIEF EXERCISES, EXERCISES, PROBLEMS, AND CRITICAL THINKING CASES Brief Exercises Topic Learning Objectives Skills B. Ex. 8.1 FIFO inventory

More information

JOHNSON GRADUATE SCHOOL OF MANAGEMENT Cornell University

JOHNSON GRADUATE SCHOOL OF MANAGEMENT Cornell University JOHNSON GRADUATE SCHOOL OF MANAGEMENT Cornell University Sample Accounting Exemption Exam Questions 1. On July 1, 20D, Allen Company signed a $50,000, one-year, 10 percent note payable. At due date, June

More information

Inventory and Cost of Goods Sold

Inventory and Cost of Goods Sold 9 Inventory and Cost of Goods Sold Overview Chapter 9 is quite long and covers a number of issues involving both inventory and cost of goods sold. Hopefully, you learned something about inventory methods

More information

CHAPTER 5 ACCOUNTING FOR MERCHANDISING BUSINESSES

CHAPTER 5 ACCOUNTING FOR MERCHANDISING BUSINESSES 1. Merchandising businesses acquire merchandise for resale to customers. It is the selling of merchandise, instead of a service, that makes the activities of a merchandising business different from the

More information

BUS312A/612A Financial Reporting I. Homework Inventory Chapter 8

BUS312A/612A Financial Reporting I. Homework Inventory Chapter 8 BUS312A/612A Financial Reporting I Homework Inventory Chapter 8 Objectives Chapter 8 You should be able to Discuss the relevance of inventory methods Compare the periodic and perpetual inventory systems

More information

Managing Working Capital. Managing Working Capital

Managing Working Capital. Managing Working Capital Managing Working Capital Working Capital is the name given to funds invested in the short-term assets of the business. While all assets should work to produce a return on investment, it is often easier

More information

INVENTORY. Merchandising Firms COST OF GOODS SOLD. Traditional bookkeeping uses separate accounts for different types of transactions

INVENTORY. Merchandising Firms COST OF GOODS SOLD. Traditional bookkeeping uses separate accounts for different types of transactions Merchandising Firms Principles of Accounting Created 2005 By Michael Worthington Elizabeth City State University INVENTORY Traditional bookkeeping uses separate accounts for different types of transactions

More information

Dutchess Community College ACC 104 Financial Accounting Chapter 6 Quiz Prep

Dutchess Community College ACC 104 Financial Accounting Chapter 6 Quiz Prep Dutchess Community College ACC 104 Financial Accounting Chapter 6 Quiz Prep Reporting & Analyzing Peter Rivera March 2007 Revised March 26, 2007 Disclaimer This Quiz Prep is provided as an outline of the

More information

Inventories. 15.501/516 Accounting Spring 2004. Professor S. Roychowdhury. Feb 25 / Mar 1, 2004

Inventories. 15.501/516 Accounting Spring 2004. Professor S. Roychowdhury. Feb 25 / Mar 1, 2004 Inventories 15.501/516 Accounting Spring 2004 Professor S. Roychowdhury Sloan School of Management Massachusetts Institute of Technology Feb 25 / Mar 1, 2004 1 Inventory Definition: Inventory is defined

More information

Accounting Lesson to Prepare for UIL Accounting Contest

Accounting Lesson to Prepare for UIL Accounting Contest Accounting Lesson to Prepare for UIL Accounting Contest Lesson Plan Title: The Accounting Equation for the Corporation Goal of Lesson: To analyze the components of the accounting equation from the beginning

More information

Accounting 303 Exam 3, Chapters 8-9 Spring 2011 Section Row

Accounting 303 Exam 3, Chapters 8-9 Spring 2011 Section Row Accounting 303 Name Exam 3, Chapters 8-9 Spring 2011 Section Row I. Multiple Choice Questions. (2 points each, 34 points in total) Read each question carefully and indicate your answer by circling the

More information

Accounting Notes. Purchasing Merchandise under the Perpetual Inventory system:

Accounting Notes. Purchasing Merchandise under the Perpetual Inventory system: Systems: Perpetual VS Periodic " Keeps running record of all goods " Does not keep a running record bought and sold " is counted once a year " is counted at least once a year " Used for all types of goods

More information

CHAPTER 9. Inventories ASSIGNMENT CLASSIFICATION TABLE. Brief. B Problems. A Problems. 1. Describe the steps in determining inventory quantities.

CHAPTER 9. Inventories ASSIGNMENT CLASSIFICATION TABLE. Brief. B Problems. A Problems. 1. Describe the steps in determining inventory quantities. CHAPTER 9 Inventories ASSIGNMENT CLASSIFICATION TABLE Study Objectives Questions Brief Exercises Exercises A Problems B Problems 1. Describe the steps in determining inventory quantities. 4, 5, 6, 7, 8,

More information

Financial Reporting and Analysis Chapter 9 Solutions Inventories. Exercises. Exercises. E9-1. Account analysis (AICPA adapted)

Financial Reporting and Analysis Chapter 9 Solutions Inventories. Exercises. Exercises. E9-1. Account analysis (AICPA adapted) Exercises E9-1. Account analysis (AICPA adapted) Financial Reporting and Analysis Chapter 9 Solutions Inventories Exercises To find merchandise inventory, we first need to find cost of goods sold. This

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

DRAFT. Accounting for a Merchandising Business. SECTION 10.1 REVIEW QUESTIONS (page 401) 1. 5. 6. 7. 8. 10. 11. 12. 13. 14. 15. 16. 17.

DRAFT. Accounting for a Merchandising Business. SECTION 10.1 REVIEW QUESTIONS (page 401) 1. 5. 6. 7. 8. 10. 11. 12. 13. 14. 15. 16. 17. CHAPTER 10 Accounting for a Merchandising Business SECTION 10.1 REVIEW QUESTIONS (page 401) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 324 Accounting 1 Student Workbook Copyright 2013 Pearson

More information

Accounting 303 Exam 3, Chapters 7-9 Fall 2011 Section Row

Accounting 303 Exam 3, Chapters 7-9 Fall 2011 Section Row Accounting 303 Name Exam 3, Chapters 7-9 Fall 2011 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

The Nature of Accounting Systems

The Nature of Accounting Systems Basic Accounting & Budgeting February 4, 2009 The Nature of Accounting Systems Accounting is the process of recording, classifying, summarizing, reporting and interpreting information about the economic

More information

Financial Statements for Manufacturing Businesses

Financial Statements for Manufacturing Businesses Management Accounting 31 Financial Statements for Manufacturing Businesses Importance of Financial Statements Accounting plays a critical role in decision-making. Accounting provides the financial framework

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

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 9. Inventories: Additional Valuation Issues. 3. Purchase commitments. 9 5, 6 9, 10 9 6

CHAPTER 9. Inventories: Additional Valuation Issues. 3. Purchase commitments. 9 5, 6 9, 10 9 6 CHAPTER 9 Inventories: Additional Valuation Issues ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1. Lower-of-cost-or-market. 1, 2,

More information

Chapter 04 - Accounting for Merchandising Operations. Chapter Outline

Chapter 04 - Accounting for Merchandising Operations. Chapter Outline I. Merchandising Activities Products that a company acquires to resell to customers are referred to as merchandise (also called goods). A merchandiser earns net income by buying and selling merchandise.

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

Chapter 6 Liquidity of Short-term Assets: Related Debt-Paying Ability

Chapter 6 Liquidity of Short-term Assets: Related Debt-Paying Ability Chapter 6 Liquidity of Short-term Assets: Related Debt-Paying Ability TO THE NET 1. a. 1. Quaker develops, produces, and markets a broad range of formulated chemical specialty products for various heavy

More information

Vol. 1, Chapter 3 - Accounting Adjustments

Vol. 1, Chapter 3 - Accounting Adjustments Vol. 1, Chapter 3 - Accounting Adjustments Problem 1 1. ($20,000 2,000) 48 = $375 per month 2. Jan. 31 Depreciation Expense $375 Accumulated Depreciation Van $375 To record depreciation expense for January

More information

Gold Run Snowmobile. Adjusting Entries and Closing Entries For The Quarter Ended December 31. Final Project Evaluation. 5 th Edition.

Gold Run Snowmobile. Adjusting Entries and Closing Entries For The Quarter Ended December 31. Final Project Evaluation. 5 th Edition. Gold Run Snowmobile 5 th Edition Adjusting Entries and Closing Entries For The Quarter Ended December 31 and the Final Project Evaluation Page 1 ADJUSTING ENTRIES FOR THE QUARTER Using a copy of the December

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

Accounting 300A 23-A Inventory Valuation Methods Page 1 of 13

Accounting 300A 23-A Inventory Valuation Methods Page 1 of 13 Accounting 300A 23-A Inventory Valuation Methods Page 1 of 13 I. Review of Key Concepts and Terms: INVENTORIES: ALTERNATIVES FOR INVENTORY VALUATION A. Inventory is defined by ARB-43 as items of tangible

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

Accounting for and Presentation of Current Assets. is used to purchase finished goods or raw materials and labor used to manufacture

Accounting for and Presentation of Current Assets. is used to purchase finished goods or raw materials and labor used to manufacture CHAPTER 5 Accounting for and Presentation of Current Assets Current assets include cash and those assets that are expected to be converted to cash or used up within one year, or an operating cycle, whichever

More information