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Accounting Chap6 - MK
Accounting Chap6 - MK
INVENTORIES AND
COST OF SALES
PowerPoint Authors:
Susan Coomer Galbreath, Ph.D., CPA
Charles W. Caldwell, D.B.A., CMA
Jon A. Booker, Ph.D., CPA, CIA
Cynthia J. Rooney, Ph.D., CPA
Winston Kwok, Ph.D., CPA
McGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
6-2
C1
C1
GOODS IN TRANSIT
FOB Shipping Point
Public
Carrier
Seller Buyer
Ownership passes
to the buyer here.
Public
Carrier
C1
GOODS ON CONSIGNMENT
Merchandise is included in the inventory of the
consignor, the owner of the inventory.
Thanks for selling my
inventory in your
store.
Consignee
Consignor
6-5
C1
C2
Minus
Minus
Discounts
Discounts Invoice Plus
Plus
Insurance
and
and
Allowances
Allowances
Cost Insurance
Plus
Plus Import
Import Plus
Plus
Duties
Duties Plus
Plus Storage
Storage
Freight
Freight
6-7
C2
INTERNAL CONTROLS AND TAKING A
PHYSICAL COUNT
Most companies take a When the physical count
physical count of does not match the
inventory at least once Merchandise Inventory
each year. account, an adjustment
must be made.
The matching
principle requires
matching costs
with sales.
6-9
P1
P1
SPECIFIC IDENTIFICATION
6 - 13
P1 SPECIFIC IDENTIFICATION
Income
Income
Statement
Statement Balance
Balance Sheet
Sheet
6 - 14
P1
SPECIFIC IDENTIFICATION
Here are the entries to record the purchases and sales. The
numbers in red are determined by the cost flow assumption used.
P1
Oldest Cost of
Costs Goods Sold
Recent Ending
Costs Inventory
6 - 16
P1
P1
P1
P1
Recent Cost of
Costs Goods Sold
Oldest
Costs
6 - 20
P1
P1
P1
P1
WEIGHTED AVERAGE
When a unit is sold, the
average cost of each unit
in inventory is assigned to
costCost of
of goods sold.
Units on
Goods
Available for
hand on the
date of sale
Sale
6 - 24
P1
WEIGHTED AVERAGE
6 - 25
P1
WEIGHTED AVERAGE
6 - 26
P1
WEIGHTED AVERAGE
6 - 27
P1
WEIGHTED AVERAGE
Here are the entries to record the purchases and sales
entries for Trekking. The numbers in red are determined by
the cost flow assumption used.
A1
FINANCIAL STATEMENT EFFECTS
OF COSTING METHODS
Because prices change, inventory methods nearly
always assign different cost amounts.
6 - 29
A3
INVENTORY TURNOVER
Shows how many times a company turns over
its inventory during a period. Indicator of how
well management is controlling the amount of
inventory available.
Inventory Cost of goods sold
Turnover = Avg. inventory
Average
Inventory = (Beg. Inv. + End Inv.) 2
6 - 34
A3
Reveals
Reveals how
how much
much inventory
inventory is
is available
available in
in
terms
terms of
of the
the number
number of
of days
days sales.
sales.
6 - 35
END OF CHAPTER 6
6 - 37
Chapter 6
Questions 2, 6, 12
QS6-5, QS6-13
Ex6-1, Ex6-4 (exclude LIFO), Ex6-6,
Ex6-13 (exclude LIFO),