Chap 6

1/3/2022
Financial Accounting Chapter Outline:

IFRS 4th Edition Learning Objectives
Weygandt ● Kimmel ● Kieso LO 1 Discuss how to classify and determine inventory.
LO 2 Apply inventory cost flow methods and discuss
their financial effects.
LO 3 Indicate the effects of inventory errors on the
Chapter 6 financial statements.
LO 4 Explain the statement presentation and analysis of
Inventories inventory.
Copyright ©2019 John Wiley & Sons, Inc. 2
Classifying and Determining Inventory

Merchandising Manufacturing
Learning Objective 1 Company Company
Discuss How to Classify and Determine One Classification: Three Classifications:
Inventory • Merchandise • Raw Materials
Inventory • Work in Process
• Finished Goods
Helpful Hint
Regardless of the classification, companies report all inventories
under Current Assets on the statement of financial position.
Copyright ©2019 John Wiley & Sons, Inc. 3 Copyright ©2019 John Wiley & Sons, Inc. 4
Determining Inventory Quantities Taking a Physical Inventory

Physical Inventory taken for two reasons: Involves counting, weighing, or measuring each kind
Perpetual System of inventory on hand.
1. Check accuracy of inventory records. Taken,
2. Determine amount of inventory lost due to wasted • when the business is closed or business is slow
raw materials, shoplifting, or employee theft. • at the end of the accounting period
Periodic System
1. Determine the inventory on hand.
2. Determine the cost of goods sold for the period.
1
1/3/2022
Determining Ownership of Goods (1 of 5) Freight Costs (2 of 5)

Goods In Transit
• Purchased goods not yet received
• Sold goods not yet delivered
Goods in transit should be included in the inventory of
the company that has legal title to the goods. Ownership of the goods Ownership of the goods
passes to the buyer when the remains with the seller until
Legal title is determined by the terms of sale.
public carrier accepts the the goods reach the buyer.
goods from the seller.
Determining Ownership of Goods (3 of 5) Determining Ownership of Goods (5 of 5)

Review Question Consigned Goods
Goods in transit should be included in the inventory of To hold the goods of other parties and try to sell the
the buyer when the: goods for them for a fee, but without taking ownership of
the goods.
a. public carrier accepts the goods from the seller.
Many car, boat, and antique dealers sell goods on
b. goods reach the buyer.
consignment. Why?
c. terms of sale are FOB destination.
d. terms of sale are FOB shipping point.
Do It! 1: Rules of Ownership (1 of 2)

Deng Imports completed its inventory count. It arrived at a total
inventory value of ¥200,000. You have been given the
information listed below. Discuss how this information affects the
Learning Objective 2
reported cost of inventory. Apply Inventory Cost Flow Methods
1. Deng included in the inventory goods held on consignment for
Falls Co., costing ¥15,000.
and Discuss Their Financial Effects
2. The company did not include in the count purchased goods of
¥10,000, which were in transit (terms: F O B shipping point).
3. The company did not include in the count inventory that had
been sold with a cost of ¥12,000, which was in transit (terms:
F O B shipping point).
2
1/3/2022
Inventory Methods and Financial Effects Specific Identification (1 of 3)

Inventory is accounted for at cost. Illustration: Crivitz TV Company purchases three identical 50-
• Cost includes all expenditures necessary to acquire inch TVs on different dates at costs of £700, £750, and £800.
goods and place them in a condition ready for sale During the year Crivitz sold two sets at £1,200 each. These
facts are summarized below.
• Unit costs are applied to quantities to determine the
Purchases
total cost of inventory and cost of goods sold using
February 3 1 TV at £700
the following costing methods:
March 5 1 TV at £750
▪ Specific identification May 22 1 TV at £800
▪ Cost flow assumptions (First-in first-out and Sales
Average-cost) June 1 2 TVs for £2,400 (£1,200 × 2)
Specific Identification (2 of 3) Specific Identification (3 of 3)

If Crivitz sold the TVs it purchased on February 3 and May 22, Costing method in which items still in inventory are
then its cost of goods sold is £1,520 (£720 + £800), and its specifically costed to arrive at the total cost of the ending
ending inventory is £750. inventory.
Cost of Goods Sold
Ending Inventory • Practice is relatively rare
£720 • Most companies make assumptions (cost flow
£750 assumptions) about which units were sold
£1,520
£800
Copyright ©2019 John Wiley & Son, Inc. 15 LO 2 Copyright ©2019 John Wiley & Son, Inc. 16
Cost Flow Assumptions (1 of 6) Cost Flow Assumptions (2 of 6)

There are two assumed cost flow methods: Illustration: Data for Lin Electronics’ Astro condensers.
1. First-in, first-out (FIFO) Date Explanation Units Unit Cost Total Cost
2. Average-cost Jan. 1 Beginning inventory 10 HK$100 HK$1,000
Apr. 15 Purchase 20 110 2,200
Cost flow does not need be consistent with the physical Aug. 24 Purchase 30 120 3,600
movement of the goods. Nov. 27 Purchase 40 130 5,200
Total units available for sale 100 HK$12,000
Units in ending inventory (45)
Units sold 55
(Beginning Inventory + Purchases) - Ending Inventory = Cost of Goods Sold
Copyright ©2019 John Wiley & Sons, Inc. 17 Copyright ©2019 John Wiley & Son, Inc. 18
3
1/3/2022
Cost Flow Assumptions (3 of 6) First-In, First-Out (FIFO) (1 of 2)

COST OF GOODS AVAILABLE FOR SALE
First-In, First-Out (FIFO) Date Explanation Units Unit Cost Total Cost
• Costs of earliest goods purchased are first to be Jan. 1 Beginning inventory 10 HK$100 HK$1,000
Apr. 15 Purchase 20 110 2,200
recognized in determining cost of goods sold
Aug. 24 Purchase 30 120 3,600
• Often parallels actual physical flow of merchandise Nov. 27 Purchase 40 130 5,200
Total 100 HK$12,000
• Companies determine cost of ending inventory by
taking unit cost of most recent purchase and working STEP 1: ENDING INVENTORY STEP 2: COST OF GOODS SOLD
Unit Total
backward until all units of inventory have been costed Date Units Cost Cost
Nov. 27 40 HK$130 HK$5,200 Cost of goods available for sale HK$12,000
Aug. 24 5 120 600 Less : Ending inventory 5,800
Total 45 HK$5,800 Cost of goods sold HK$ 6,200
Copyright ©2019 John Wiley & Son, Inc. 19 Copyright ©2019 John Wiley & Son, Inc. 20
Average-Cost (1 of 2)
Cost Flow Assumptions (4 of 6) COST OF GOODS AVAILABLE FOR SALE
Date Explanation Units Unit Cost Total Cost
Average-Cost Jan. 1 Beginning inventory 10 HK$100 HK$1,000
• Allocates cost of goods available for sale on basis of Apr. 15 Purchase 20 110 2,200
weighted-average unit cost incurred Aug. 24 Purchase 30 120 3,600
Nov. 27 Purchase 40 130 5,200
• Applies weighted-average unit cost to units on hand Total 100 HK$12,000
to determine cost of ending inventory
STEP 1: ENDING INVENTORY STEP 2: COST OF GOODS SOLD
Unit Total
Units Cost Cost
HK$12,000 ÷ 100 = HK$120 Cost of goods available for sale HK$12,000
Cost of goods sold 5,400
45 HK$120 HK$5,400 Less : Ending inventory HK$ 6,600
Financial Statement and Tax Effects Income Statement Effects

of Cost Flow Methods Lin Electronics
Condensed Income Statements
Either of the two cost flow assumptions is acceptable for FIFO Average-Cost
Sales revenue HK$11,500 HK$11,500
use. Beginning inventory 1,000 1,000
Purchases 11,000 11,000
• Lenovo (CHN) uses the average-cost method
Cost of goods available for sale 12,000 12,000
• Yingli Solar (CHN) uses average-costing for key raw Ending inventory 5,800 5,400
Cost of goods sold 6,200 6,600
materials and FIFO for the remainder of its inventories Gross profit 5,300 4,900
Operating expenses 2,000 2,000
Income before income taxes 3,300 2,900
Income tax expense (30%) 990 870
Net income HK$ 2,310 HK$ 2,030
4
1/3/2022
Statement of Financial Position Effects (1 of 2) Tax Effects

• A major advantage of the FIFO method is that in a • Both inventory and net income are higher when
period of inflation, costs allocated to ending companies use FIFO in a period of inflation
inventory will approximate their current cost • Average-cost results in lower income taxes (because
• A shortcoming of the average-cost method is that in a of lower net income) during times of rising prices
period of inflation, costs allocated to ending
inventory may be understated in terms of current
cost
Using Inventory Cost Flow Methods Cost Flow Assumptions (5 of 6)

Consistently The cost flow method that often parallels the actual
• Method should be used consistently, enhances physical flow of merchandise is the:
comparability a. FIFO method
• Although consistency is preferred, a company may b. LIFO method
change its inventory costing method
c. average cost method
d. gross profit method
DO IT! 2: Cost Flow Methods DO IT! 2: FIFO Method

The accounting records of Shumway Implements show the Determine cost of goods sold under a periodic inventory.
following data.
Beginning inventory 4,000 units at € 3
Purchases 6,000 units at € 4 Beginning inventory 4,000 €3 €12,000
Sales 7,000 units at €12 Purchase 6,000 4 24,000
Total 10,000 €36,000
Determine the cost of goods sold during the period under a
periodic inventory system using (a) the FIFO method, and (b)
the average-cost method.
Unit Total Cost of goods available for sale €36,000
Units Cost Cost Less : Ending inventory 12,000
3,000 €4 €12,000 Cost of goods sold € 24,000
5
1/3/2022
DO IT! 2: Average-Cost
Determine cost of goods sold under a periodic inventory.

Date Explanation
Beginning inventory
Units
4,000
Unit Cost
€3.00
Total Cost
€12,000
Indicate the Effects of Inventory Errors
Purchase 6,000 4.00 24,000 on the Financial Statements
Total 10,000 €3.60 €36,000
Average Cost Per Unit
Unit Total Cost of goods available for sale €36,000
Units Cost Cost Less : Ending inventory 10,800
3,000 €3.60 €10,800 Cost of goods sold € 25,200
Copyright ©2019 John Wiley & Son, Inc. 31 Copyright ©2019 John Wiley & Sons, Inc. 32
Effects of Inventory Errors Income Statement Effects (1 of 5)

Common Cause: Inventory errors affect the computation of cost of goods sold
and net income in two periods.
• Failure to count or price inventory correctly
Cost of Cost of
• Not properly recognizing the transfer of legal title to Beginning
+ Goods -
Ending
= Goods
goods in transit Inventory Inventory
Purchased Sold
• Errors affect both the income statement and the Cost of
statement of financial position When Inventory Error: Goods Sold Is: Net Income Is:
Understates beginning inventory Understated Overstated
Overstates beginning inventory Overstated Understated
Understates ending inventory Overstated Understated
Overstates ending inventory Understated Overstated
Income Statement Effects (2 of 5) Income Statement Effects (3 of 5)

Inventory errors affect the computation of cost of goods 2019 2020
Incorrect Correct Incorrect Correct
sold and net income in two periods. Sales € 80,000 € 80,000 € 90,000 € 90,000
Beginning inventory 20,000 20,000 12,000 15,000
• An error in ending inventory of current period will Cost of goods purchased 40,000 40,000 68,000 68,000
have a reverse effect on net income of next Cost of goods available 60,000 60,000 80,000 83,000
accounting period Ending inventory 12,000 15,000 23,000 23,000
Cost of good sold 48,000 45,000 57,000 60,000
• Over two years, total net income is correct because Gross profit 32,000 35,000 33,000 30,000
errors offset each other Operating expenses 10,000 10,000 20,000 20,000
Net income € 22,000 € 25,000 € 13,000 € 10,000
• Ending inventory depends entirely on accuracy of
Combined income
taking and costing inventory for 2-year period is (€3,000) €3,000
correct. Understated Overstated
6
1/3/2022
Income Statement Effects (4 of 5) Statement of Financial Position Effects (2 of 2)

Understating ending inventory will overstate: Effect of inventory errors on the statement of financial
a. assets position is determined by using the basic accounting
equation: Assets = Liabilities + Equity.
b. cost of goods sold
Errors in the ending inventory have the following effects.
c. net income
d. stockholders’ equity Ending
Inventory Error Assets Liabilities Equity
Overstated Overstated No effect Overstated
Understated Understated No effect Understated
LO 3 Copyright ©2019 John Wiley & Son, Inc. 37 Copyright ©2019 John Wiley & Son, Inc. 38
DO IT! 3: Inventory Errors

Visual Designs overstated its 2019 ending inventory by
NT$22,000. Determine the impact this error has on ending Learning Objective 4
inventory, cost of goods sold, and owner’s equity in 2019 and
2020. Explain the Statement Presentation
Solution 2019 2020 and Analysis of Inventory
Ending inventory NT$22,000 overstated No effect
Cost of goods sold NT$22,000 understated NT$22,000 overstated
Owner’s equity NT$22,000 overstated No effect
Statement Presentation and Analysis (1 of 2) Lower-of-Cost-or-Net Realizable Value (1 of 2)

Presentation When the value of inventory is lower than its cost
Statement of Financial Position - Inventory classified as • Companies must “write down” inventory to its net
current asset. realizable value
Income Statement - Cost of goods sold subtracted from • Net realizable value: Amount that company expects
sales. to realize (receive from the sale of inventory)
There also should be disclosure of • Example of conservatism
1. major inventory classifications
2. basis of accounting (cost or LCNRV)
3. costing method (FIFO, or average-cost)
7
1/3/2022
Lower-of-Cost-or-Net Realizable Value (2 of 2) Statement Presentation and Analysis (2 of 2)

Illustration: Assume that Gao TVs has the following lines of Analysis
merchandise with costs and net realizable values as indicated.
Inventory management is a double-edged sword
Net
Cost Realizable Lower-of-Cost-or-Net 1. High Inventory Levels - may incur high carrying
Units per Unit Value per Unit Realizable Value costs (e.g., investment, storage, insurance,
Flat-screen TVs 100 NT$600 NT$550 NT$ 55,000 (NT$550 x 100)
Satellite radios 500 90 104 45,000 (NT$90 x 500) obsolescence, and damage).
DVD recorders 850 50 48 40,800 (NT$48 x 850)
2. Low Inventory Levels – may lead to stock-outs and
DVDs 3,000 5 6 15,000 (NT$5 x 3,000)
Total inventory NT$155,800 lost sales.
Analysis (1 of 2) Analysis (2 of 2)
Inventory turnover measures the number of times on Illustration: Esprit Holdings (HKG) reported in a recent annual
average the inventory is sold during the period. report a beginning inventory of HK$3,209 million, an ending
inventory of HK$3,254 million, and cost of goods sold for the year
Cost of Goods Sold ended of HK$12,071 million. Illustration 6.16 shows the inventory
Inventory
= turnover formula and computation for Esprit Holdings.
Turnover Average Inventory
Cost of
÷ Average Inventory = Inventory Turnover
Days in inventory measures the average number of Goods Sold
days inventory is held. HK$3,209 + HK$3,254
HK$12,071 ÷ = 3.7 Times
Days in Year (365) 2
Days in
=
Inventory Inventory Turnover 365 ÷ 3.7 = 98.6 Days
DO IT! 4: LCNRV and Inventory Turnover DO IT! 4: Inventory Turnover (1 of 2)

Poon Heaters sells three different types of home heating stoves Early in 2020, Westmoreland Company switched to a just-in-time
(gas, wood, and pellet). The cost and net realizable value of its inventory system. Its sales revenue, cost of goods sold, and
inventory of stoves are as follows. inventory amounts for 2019 and 2020 are shown below.
Cost Net Realizable Value 2019 2020
Gas NT$ 84,000 NT$ 79,000 Sales revenue NT$2,000,000 NT$1,800,000
Wood 250,000 280,000 Cost of goods sold 1,000,000 910,000
Pellet 112,000 101,000 Beginning inventory 290,000 210,000
Determine the value of the company’s inventory under the lower- Ending inventory 210,000 50,000
of-cost-or-net realizable value approach. Determine the inventory turnover and days in inventory for 2019
Solution: The lowest value for each inventory type is gas and 2020.
NT$79,000, wood NT$250,000, and pellet NT$101,000. The total
inventory value is the sum of these amounts, NT$430,000.
8
1/3/2022
DO IT! 4: Inventory Turnover (2 of 2)

2019 2020
Sales revenue NT$2,000,000 NT$1,800,000
Cost of goods sold 1,000,000 910,000
Beginning inventory 290,000 210,000 Apply the Inventory Cost Flow Methods
Ending inventory 210,000 50,000
to Perpetual Inventory Records
2019 2020
Inventory
turnover NT$1,000,000 NT$910,000 =7
=4
(NT$290,000 + NT$210,000)/2 (NT$210,000 + NT$50,000)/2
Days in 365 ÷ 4 = 91.3 Days 365 ÷ 7 = 52.1 Days
inventory
Appendix 6A Inventory Cost Flow Methods in First-In, First-Out (FIFO) (2 of 2)

Perpetual Inventory Systems
LIN ELECTRONICS Cost of
Balance Date Purchases Goods Sold Inventory Balance
Date Explanation Units Unit Cost Total Cost January 1 (10 @ HK$100) HK$1,000
in Units
April 15 (20 @ $110) HK$2,200 (10 @ HK$100)
1/1 Beginning inventory 10 $100 HK$ 1,000 10 HK$3,200
(20 @ HK$110)
4/15 Purchase 20 110 2,200 30 August 24 (30 @ $120) HK$3,600 (10 @ HK$100)
8/24 Purchase 30 120 3,600 60 (20 @ HK$110) HK$6,800
9/10 Sale 55 5 (30 @ HK$120)
11/27 Purchase 40 130 5,200 45 September 10 (10 @ HK$100)
HK$12,000 (20 @ HK$110)
(25 @ HK$120) (5 @ HK$120) HK$600
HK$6,200
Illustration: Compute Cost of Goods Sold and Ending Inventory under November 27 (40 @ $13) HK$5,200 (5 @ HK$120)
HK$5,800
FIFO and average-cost. (40 @ HK$130)
Average-Cost (2 of 2)
Cost of
Date Purchases Goods Sold Inventory Balance
January 1
April 15 (20 @ HK$110) HK$2,200
(10 @ HK$100)
(30 @ HK$106.667)
HK$ 1,000
HK$ 3,200 Learning Objective 6
August 24 (30 @ HK$120) HK$3,600 (60 @ HK$113.333) HK$ 6,800
September 10 (55 @ HK$113.333) (5 @ HK$113.333) HK$ 567 Describe the Two Methods of
HK$6,233
November 27 (40 @ HK$130) HK$5,200 (45 @ HK$128.156) HK$5,767 Estimating Inventories
9
1/3/2022
Appendix 6B Estimating Inventories Gross Profit Method (1 of 2)

Gross Profit Method Illustration: Kishwaukee Company records show net sales of
A method of estimating the cost of ending inventory by $200,000, beginning inventory $40,000, and cost of goods
applying a gross profit rate to net sales. purchased $120,000. In the preceding year, the company
realized a 30% gross profit rate. It expects to earn the same
Estimated Estimated rate this year. Compute the estimated cost of the ending
Step 1: Net Sales - Gross = Cost of inventory at January 31 under the gross profit method.
Profit Goods Sold
Cost of Goods Estimated Estimated

Step 2: - Cost of = Cost of
Available
for Sale Goods Sold Ending Inventory
Gross Profit Method (2 of 2) Retail Inventory Method (1 of 2)

Illustration: Compute the estimated cost of the ending • Retail companies establish a relationship between cost
inventory at January 31 under the gross profit method. and sales price
Step 1:
• Applies cost-to-retail percentage to ending inventory at
Net sales $200,000 retail prices to determine inventory at cost
Less: Estimated gross profit (30% × $200,000) 60,000
Goods Available Ending Inventory
Estimated cost of goods sold $140,000 Step 1: - Net Sales =
for Sale at Retail at Retail
Step 2:
Step 2: Goods Available Goods Available Cost-to-
Beginning inventory $ 40,000 ÷ =
for Sale at Cost for Sale at Retail Retail Ratio
Cost of goods purchased 120,000
Cost of goods available for sale 160,000 Step 3: Ending Cost-to- Estimated Cost of
x =
Less: Estimated cost of goods sold 140,000 Inventory at Retail Retail Ratio Ending Inventory
Estimated cost of ending inventory $ 20,000
Retail Inventory Method (2 of 2)

Illustration: It is not necessary to take a physical inventory to
determine the estimated cost of goods on hand. Learning Objective 7
At Cost At Retail
Beginning inventory $14,000 $ 21,500
Apply the LIFO Inventory Costing
Goods purchased 61,000 78,500 Method
Goods available for sale $75,000 100,000
Less: Net sales 70,000
Step (1) Ending inventory at retail = $ 30,000
Step (2) Cost-to-retail ratio = $75,000 ÷ $100,000 = 75%
Step (3) Estimated cost of ending inventory = $30,000 x 75% = $22,500
10
1/3/2022
Last-In, First-Out (LIFO)

Cost Flow Assumptions COST OF GOODS AVAILABLE FOR SALE
Last-In, First-Out (LIFO) Jan. 1 Beginning inventory 100 HK$10 $1,000
Apr. 15 Purchase 200 11 2,200
• Costs of latest goods purchased are first to be Aug. 24 Purchase 300 12 3,600
recognized in determining cost of goods sold Nov. 27 Purchase 400 13 5,200
Total 1,000 HK$12,000
• Seldom coincides with actual physical flow of
merchandise STEP 1: ENDING INVENTORY STEP 2: COST OF GOODS SOLD
• Exceptions include goods stored in piles, such as coal Unit Total
Date Units Cost Cost
or hay Jan. 1 100 HK$10 HK$1,000 Cost of goods available for sale HK$12,000
Apr. 15 200 11 2,200 Less : Ending inventory 5,000
Aug. 24 150 12 1,800 Cost of goods sold HK$ 7,000
Total 450 HK$5,000
A Look at U.S. GAAP (1 of 4)

Key Points
Learning Objective 8 Similarities
• The definitions for inventory are essentially similar under GAAP and
Compare the Accounting for IFRS. Both define inventory as assets held-for-sale in the ordinary
course of business, in the process of production for sale (work in
Inventories Under IFRS and U.S. GAAP process), or to be consumed in the production of goods or services
(e.g., raw materials).
• Who owns the goods—goods in transit or consigned goods—as well
as the costs to include in inventory are essentially accounted for the
same under IFRS and GAAP.
• Except for LIFO under GAAP, both IFRS and GAAP use the lower-of-
cost-or-net realizable value for inventory valuation.
Copyright ©2019 John Wiley & Sons, Inc. 63 Copyright ©2019 John Wiley & Son, Inc. 64
A Look at U.S. GAAP (2 of 4) A Look at U.S. GAAP (3 of 4)

Key Points Key Points
Differences Differences
• Both GAAP and IFRS permit specific identification where appropriate. • IFRS generally requires pre-harvest inventories of agricultural
IFRS actually requires that the specific identification method be used products (e.g., growing crops and farm animals) to be reported at fair
where the inventory items are not interchangeable (i.e., can be value less cost of disposal. GAAP generally requires these items to be
specifically identified). If the inventory items are not specifically recorded at cost.
identifiable, a cost flow assumption is used. GAAP does not specify
situations in which specific identification must be used.
• A major difference between IFRS and GAAP relates to the LIFO cost
flow assumption. GAAP permits the use of LIFO for inventory
valuation. IFRS prohibits its use. FIFO and average-cost are the only
two acceptable cost flow assumptions permitted under IFRS.
LO 7 Copyright ©2019 John Wiley & Son, Inc. 65 Copyright ©2019 John Wiley & Son, Inc. 66
11
1/3/2022
A Look at U.S. GAAP (4 of 4) Copyright

Looking to the Future
Copyright © 2019 John Wiley & Sons, Inc.
One convergence issue that will be difficult to resolve relates to the use
of the LIFO cost flow assumption. As indicated, IFRS specifically prohibits All rights reserved. Reproduction or translation of this work beyond that permitted in
its use. Conversely, the LIFO cost flow assumption is widely used in the Section 117 of the 1976 United States Act without the express written permission of the
United States because of its favorable tax advantages. In addition, many
argue that LIFO from a financial reporting point of view provides a better copyright owner is unlawful. Request for further information should be addressed to the
matching of current costs against revenue and, therefore, enables Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up
companies to compute a more realistic income.
copies for his/her own use only and not for distribution or resale. The Publisher assumes
no responsibility for errors, omissions, or damages, caused by the use of these programs
or from the use of the information contained herein.
12

Chap 6

Uploaded by

Copyright:

Available Formats

Chap 6

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Chap 6

Uploaded by

Copyright:

Available Formats

1/3/2022

Financial Accounting Chapter Outline:

Copyright ©2019 John Wiley & Sons, Inc. 2

Classifying and Determining Inventory

Determining Inventory Quantities Taking a Physical Inventory

1. Check accuracy of inventory records. Taken,

Determining Ownership of Goods (1 of 5) Freight Costs (2 of 5)

Determining Ownership of Goods (3 of 5) Determining Ownership of Goods (5 of 5)

Do It! 1: Rules of Ownership (1 of 2)

Inventory Methods and Financial Effects Specific Identification (1 of 3)

Specific Identification (2 of 3) Specific Identification (3 of 3)

Cost Flow Assumptions (1 of 6) Cost Flow Assumptions (2 of 6)

Cost Flow Assumptions (3 of 6) First-In, First-Out (FIFO) (1 of 2)

Financial Statement and Tax Effects Income Statement Effects

Statement of Financial Position Effects (1 of 2) Tax Effects

Using Inventory Cost Flow Methods Cost Flow Assumptions (5 of 6)

DO IT! 2: Cost Flow Methods DO IT! 2: FIFO Method

COST OF GOODS AVAILABLE FOR SALE

Effects of Inventory Errors Income Statement Effects (1 of 5)

Income Statement Effects (2 of 5) Income Statement Effects (3 of 5)

Income Statement Effects (4 of 5) Statement of Financial Position Effects (2 of 2)

DO IT! 3: Inventory Errors

Statement Presentation and Analysis (1 of 2) Lower-of-Cost-or-Net Realizable Value (1 of 2)

Lower-of-Cost-or-Net Realizable Value (2 of 2) Statement Presentation and Analysis (2 of 2)

DO IT! 4: LCNRV and Inventory Turnover DO IT! 4: Inventory Turnover (1 of 2)

DO IT! 4: Inventory Turnover (2 of 2)

Appendix 6A Inventory Cost Flow Methods in First-In, First-Out (FIFO) (2 of 2)

Appendix 6B Estimating Inventories Gross Profit Method (1 of 2)

Cost of Goods Estimated Estimated

Gross Profit Method (2 of 2) Retail Inventory Method (1 of 2)

Retail Inventory Method (2 of 2)

Last-In, First-Out (LIFO)

A Look at U.S. GAAP (1 of 4)

A Look at U.S. GAAP (2 of 4) A Look at U.S. GAAP (3 of 4)

A Look at U.S. GAAP (4 of 4) Copyright

You might also like