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AU / Accounting / ACCT 2110 / Inventory should up to what?

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
26 Pages 181 Views 3 Unlocks
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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

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