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1、沈阳大学国际商学院 International Business College of Shenyang University,Chapter 6,Inventories and Cost of Sales,沈阳大学国际商学院 International Business College of Shenyang University,Conceptual Chapter Objectives,C1: Identify the items making up merchandise inventory C2: Identify the costs of merchandise inventory
2、,沈阳大学国际商学院 International Business College of Shenyang University,Analytical Chapter Objectives,A1: Analyze the effects of inventory methods for both financial and tax reporting A2: Analyze the effects of inventory errors on current and future financial statements A3: Assess inventory management usin
3、g both inventory turnover and days sales in inventory,沈阳大学国际商学院 International Business College of Shenyang University,Procedural Chapter Objectives,P1: Compute inventory in a perpetual system using the methods of specific identification, FIFO, LIFO, and weighted average P2: Compute the lower of cost
4、 or market amount of inventory P3: Appendix 6A: Compute inventory in a periodic system using the methods of specific identification, FIFO, LIFO, and weighted average P4: Appendix 6B: Apply both the retail inventory and gross profit methods to estimate inventory.,沈阳大学国际商学院 International Business Coll
5、ege of Shenyang University,Determining Inventory Items,Merchandise inventory includes all goods that a company owns and holds for sale, regardless of where the goods are located when inventory is counted.,Items requiring special attention include:,Goods in Transit,Goods Damaged or Obsolete,Goods on
6、Consignment,C 1,沈阳大学国际商学院 International Business College of Shenyang University,Goods in Transit,C 1,沈阳大学国际商学院 International Business College of Shenyang University,Goods on Consignment,Merchandise is included in the inventory of the consignor, the owner of the inventory.,Consignor,Consignee,Thanks
7、for selling my inventory in your store.,C 1,沈阳大学国际商学院 International Business College of Shenyang University,Goods Damaged or Obsolete,Damaged or obsolete goods are not counted in inventory if they cannot be sold.,Cost should be reduced to net realizable value if they can be sold.,C 1,沈阳大学国际商学院 Inter
8、national Business College of Shenyang University,Determining Inventory Costs,Invoice Cost,Include all expenditures necessary to bring an item to a salable condition and location.,Minus Discounts and Allowances,Plus Import Duties,Plus Freight,Plus Storage,Plus Insurance,C 2,沈阳大学国际商学院 International Bu
9、siness College of Shenyang University,Internal Controls and Taking a Physical Count,Most companies take a physical count of inventory at least once each year. When the physical count does not match the Merchandise Inventory account, an adjustment must be made.,C 2,沈阳大学国际商学院 International Business Co
10、llege of Shenyang University,Inventory Costing Under a Perpetual System,Inventory affects . . .,The matching principle requires matching cost of sales with sales.,Balance Sheet,Income Statement,P1,沈阳大学国际商学院 International Business College of Shenyang University,Inventory Costing Under a Perpetual Sys
11、tem,Accounting for inventory requires several decisions . . .,Costing Method Specific Identification, FIFO, LIFO, or Weighted Average Inventory System Perpetual or Periodic,P1,沈阳大学国际商学院 International Business College of Shenyang University,Frequency in Use of Inventory Methods,P1,沈阳大学国际商学院 Internati
12、onal Business College of Shenyang University,Inventory Cost Flow Assumptions,First-In, First-Out (FIFO),Assumes costs flow in the order incurred.,Last-In, First-Out (LIFO),Assumes costs flow in the reverse order incurred.,Weighted Average,Assumes costs flow at an average of the costs available.,P1,沈
13、阳大学国际商学院 International Business College of Shenyang University,Inventory Costing Illustration,P1,沈阳大学国际商学院 International Business College of Shenyang University,Specific Identification,When units are sold, the specific cost of the unit sold is added to cost of goods sold.,P1,沈阳大学国际商学院 International
14、Business College of Shenyang University,Specific Identification,The above purchases were made in August. On August 14, a company sold eight bikes originally costing $91 and 12 bikes originally costing $106.,P1,沈阳大学国际商学院 International Business College of Shenyang University,The Cost of Goods Sold for the August 14 sale is $2,000. 8 bikes 91 = $ 728 12
