2012中级财务会计英文版第五章课件-存货FA05Inventory

Physical Goods Included in Inventory
Physical Goods A company should record purchases when it obtains legal title to the goods.
Special Consideration:
Goods in Transit (FOB shipping point, FOB destination) Consigned goods Sales with buyback agreement Sales with high rates of return Sales on installment Inventory errors（P171、172）
Inventories
Inventory Classification and Control Classification Control Costs Included in Inventory Lower-ofCost-orMarket Ceiling and floor Application of LCM Evaluation of rule
Merchandiser
or
Manufacturer
Type of Business
Balance Sheet (in thousands) Current assets Cash Marketable securities Accounts receivable Merchandise inventory Prepaids Total current assets Investments: Invesment in ABC bonds Investment in UC Inc. Notes receivable Land held for speculation Sinking fund Pension fund $ 285,000 530,000 149,000 777,000 33,000 1,774,000 Hale Waihona Puke Baidu21,657 253,980 150,000 550,000 225,000 653,798
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Purchases Accounts payable
6,300 6,300
Accounts receivable Sales
8,400 8,400
4. Adjusting entries (ending inventory = 400 units @ $7 = $2,800)
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No Entry Necessary
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Inventory Cost of goods sold Purchases
2,100 4,200 6,300
Basic Issues in Inventory Valuation
Valuation of Inventories Requires: The physical goods (goods on hand, goods in transit, consigned goods, special sales agreements). The costs to include (product vs. period costs). The cost flow assumption (FIFO, LIFO, Average cost, Specific Identification, Retail, etc.).
Purchases.
2. Ending Inventory determined by physical count. 3. Calculation of Cost of Goods Sold:
Beginning inventory $ 100,000 Purchases, net 800,000 Goods available for sale 900,000 Ending inventory 125,000 Cost of goods sold $ 775,000
Purchases and Inventory Understated
The understatement does not affect cost of goods sold and net income because the errors offset one another.
Costs Included in Inventory
Net purchases
= Purchases － Purchases returns and allowances －Purchases discounts ＋ Freight-in
Treatment of Purchase Discounts
Gross Method
Merchandiser
One inventory account Purchase goods ready for sale
Balance Sheet (in thousands) Current assets Cash Marketable securities Accounts receivable Inventory Raw materials Work in process Finished goods Total inventory Prepaids Total current assets Investments: Invesment in ABC bonds 321,657 $ 285,000 530,000 149,000 210,000 417,000 150,000 777,000 33,000 1,774,000
Effect of Inventory Errors
Errors in the amount of ending inventory have a direct dollar-for-dollar effect on cost of goods sold and net income.
For this reason, independent auditors, income tax auditors, and financial analysts look closely at reported inventory amounts.
Perpetual System
vs.
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Periodic System
1. Beginning inventory (100 units at $7 = 700) 2. Purchase 900 units at $7: Inventory Accounts payable 3. Sale of 600 untis at $14: Accounts receivable Sales Cost of goods sold Inventory 8,400 8,400 4,200 4,200 6,300 6,300
Classification
Inventories are asset items held for sale, or goods to be used in the production of goods to be sold.
存货是指企业在日常活动中持有以备出售的产 成品或商品、处在生产过程中的在产品、在生产过 程或提供劳务过程中消耗的材料和物料等。 Businesses with Inventory:
Manufacturer
Three accounts Raw materials Work in process Finished goods
Flow of Costs
Control
Two systems for maintaining inventory records:
Perpetual System
Product Costs - costs directly connected with bringing the goods to the buyer’s place of business and converting such goods to a salable condition.
Period Costs – generally selling, general, and administrative expenses. Purchase Discounts – Gross vs. Net Method
Inventory
Chapter 5
Intermediate Accounting 12th Edition Kieso, Weygandt, and Warfield
Learning Objectives
1. Identify major classifications of inventory. 2. Distinguish between perpetual and periodic inventory systems. 3. Understand the items to include as inventory cost. 4. Describe and compare the cost flow assumptions used to account for inventories. 5. Describe and apply the lower-of-costor-market rule.
Periodic System
Cost of goods sold is determined each time inventory is sold.
Cost of goods sold is determined at period end.
Perpetual System Features:
3. Cost of goods sold is debited and Inventory 4. Physical count done to verify Inventory
balance.
Periodic System Features:
1. Purchases of merchandise are debited to
The cost of inventory is the sum of all the costs incurred to bring it to its intended use, less any discounts. Other cost, such as advertising and sale commissions are not included as the cost of inventory.
Ending Inventory Understated
The effect of an error on net income in one year (2006) will be counterbalanced in the next (2007), however the income statement will be misstated for both years.
1. Purchases of merchandise are debited to
Inventory.
2. Freight-in, purchase returns and
allowances, and purchase discounts are recorded in Inventory. is credited for each sale.
Cost Flow Assumptions
Basic inventory valuation issues
Product costs Specific identification Period costs Average cost Purchase discounts FIFO LIFO
Inventory Classification and Control