Inventory should up to what?
Inventory should up to what?
Description
School: Auburn University
Department: Accounting
Course: Principles of Financial Accounting
Professor: Elizabeth miller
Term: Fall 2015
Tags:
Cost: 50
Name: ACCT2110 Exam 3 Study Guide
Description: Chapters 6 and 7 - Cost of Goods Sold and PP&E
Uploaded: 03/27/2017
Reviews
Test Chapter 3-5If you want to learn more check out Are weather and climate are the same?
Allowance
% sales
500 adjustments Don't forget about the age old question of What is the retrovirus?
9500 Bad Debt Exp
and for provision
% net saleDon't forget about the age old question of What is the control of gene expression in eukaryotes?
950,000
= 9500
Allowance for Bad Debts Estimate
% receivables (actual) write off
1,100 ✓ UnadjustedWe also discuss several other topics like What is the history of poverty in america?
11,800 🞼 Increase
Uncollectible Account Exp
12,900 ✓ aging analysis
Don't forget about the age old question of Why is the earth warming up?
Chapter 6 - Inventory Cost - basis → adjust based on what is paidWe also discuss several other topics like In what way do the asch experiments demonstrate conformity?
Inventory
Balance Sheet
Feb 1
Beginning balance
Buying things
Selling things (Cost of Goods Sold)
Balance Sheet
Ending balance
Feb 28
Inventory as an asset
• “intended for sale” - differs from other assets
• recorded at acquisition cost
• becomes an exp when sold - “cost of goods sold”
Lots of planning and strategy in inventory management
- Need to buy lower than selling
- Need to sell quickly so it isn't just sitting
- Need to strategize the market
Inventory is the lifeblood of a company
Cost of Goods Sold Impacts Gross margin / profit
🞼 and of resources left to pay operating expenses and provide net income amount made just from buying low and selling high
Merchandisers
Buy low, sell higher
Don’t manufacture or process
Only have expense when acquiring
Gain most profit from selling
Retailers and Wholesalers
“Merchandise Inventory”
3 Classes Inventory:
- Raw material required to create product
- Work in process stages of product creation
- Finished goods ready for sale
You can look at the categories and see production progress → lots raw, lots finished, no inprogress
What’s wrong?
Beginning Inventory + Purchases = Cost of Goods Available for sale - Ending Inventory = Cost of Goods sold
Net Purchases - overall increase to inventory
Perpetual system: cost of goods sold updated with each sale
every change touches inventory account
Periodic - check inventory at a period
One entry to CoGS Inventory
Debt Increase
Credit Decrease
Beginning Feb 1
Purchases
(FOB SP) Freight-in
Sell inventory SOLD
- Purchase returns cost and quantity ⎫ CoGS
Purchase discounts cost only ⎬
- Purchase allowances ⎭
Expense (lowers asset)
Unsold Feb 28
Actual on-hand ending
- Usually combined
Inventory represents cost
- Perpetually up to date
- Recorded at cost
- Merchandise cost + shipping cost
- Represents on-hand and ready to sell
FOB - Shipping point [FoB = Free on board] “freight-in”
Title passes to buyer when shipped risk + cost of shipping
FOB - destination (paying higher purchase price)
Title passes to buyer when arrives
Seller responsible
Purchase - recorded by inc. inventory account
$ Purchase Discounts - 2/10, n 30, reduces inventory account
$# Purchase Returns - returns - returns, reduction inv
$ Purchase Allowances - $ concession for credits defective merch,. quality quest; inventory reduction
Consignment - hold for someone else for % of sale
physical possession ≠ ownership
Consignor records inventory
Consignee earns fee (commission)
Ex: 6-45 Recording perpetual purchases
1250 bags on account at $5.50 each (2/10, n 30; FOB SP)
Paid $ 320 to have delivered
50 bags returned Inventory Accounts Payable
Paid for remainder 6875 6875
320 275 275
6920 6600
1 record the purchase:
1250 at 5.50 ea = $6,875
⎰inventory $6,875 ⎱ acquisition
⎱ Account Payable $6,875 ⎰
2 record payment for shipping: $320
⎰inventory $320 ⎱ shipping increases
⎱ Cash $320 ⎰ cost of inventory
