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6-1
Chapter 6
Inventories
Slide
6-3
Ch.6-Inventories
Ch.6-Inventories
Menentukan Statement
Mengklasifikasi Inventory Inventory
Kuantitas Presentation
kan Persediaan Costing Errors
Persediaan and Analysis
Slide
6-4
Classifying
Classifying Inventory
Inventory
Merchandising Manufacturing
Company Company
One Classification: Three Classifications:
Merchandise Inventory Raw Materials
Work in Process
Finished Goods
Slide
6-5
Slide Answer on notes page
6-6
Determining
Determining Inventory
Inventory Quantities
Quantities
Periodic System
1. Determine the inventory on hand
2. Determine the cost of goods sold for the period.
Slide
6-7
SO 1 Describe the steps in determining inventory quantities.
Determining
Determining Inventory
Inventory Quantities
Quantities
Taken,
Slide
6-8
SO 1 Describe the steps in determining inventory quantities.
Determining
Determining Inventory
Inventory Quantities
Quantities
Slide
6-9
SO 1 Describe the steps in determining inventory quantities.
Determining
Determining Inventory
Inventory Quantities
Quantities
Goods in Transit Illustration 6-1
Slide
6-10
SO 1 Describe the steps in determining inventory quantities.
Determining
Determining Inventory
Inventory Quantities
Quantities
Review Question
Goods in transit should be included in the inventory of
the buyer when the:
a. public carrier accepts the goods from the seller.
b. goods reach the buyer.
c. terms of sale are FOB destination.
d. terms of sale are FOB shipping point.
Slide
6-11
SO 1 Describe the steps in determining inventory quantities.
Determining
Determining Inventory
Inventory Quantities
Quantities
Slide
6-12
SO 1 Describe the steps in determining inventory quantities.
Inventory
Inventory Costing
Costing
Specific Identification
Illustration 6-3
First-In-First-Out (FIFO)
Earliest goods purchased are first to be sold.
First-In-First-Out (FIFO)
Illustration 6-5
Average-Cost
Allocates cost of goods available for sale on the
basis of weighted average unit cost incurred.
Average Cost
Illustration 6-8
Income
Statement
Effects
Slide
6-24
SO 3 Explain the financial effects of the inventory cost flow assumptions.
Inventory
Inventory Costing
Costing
Slide
6-25
SO 3 Explain the financial effects of the inventory cost flow assumptions.
Inventory
Inventory Costing
Costing
Tax Effects
In a period of inflation:
FIFO - inventory and net income higher.
AVERAGE Cost - lower income taxes.
Slide
6-26
SO 3 Explain the financial effects of the inventory cost flow assumptions.
Inventory
Inventory Costing
Costing
Review Question
In a period of rising prices, average cost will produce:
a. higher net income than FIFO.
b. the same net income as FIFO.
c. lower net income than FIFO.
d. net income is equal to the specific identification
method.
Slide
6-27
SO 3 Explain the financial effects of the inventory cost flow assumptions.
Inventory
Inventory Costing
Costing
Slide
6-28
SO 3 Explain the financial effects of the inventory cost flow assumptions.
Slide Answer on notes page
6-29
Inventory
Inventory Costing
Costing
Common Cause:
Failure to count or price inventory correctly.
Slide
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SO 5 Indicate the effects of inventory errors on the financial statements.
Inventory
Inventory Errors
Errors
Illustration 6-12
Slide
6-33
SO 5 Indicate the effects of inventory errors on the financial statements.
Inventory
Inventory Errors
Errors
Slide
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SO 5 Indicate the effects of inventory errors on the financial statements.
Inventory
Inventory Errors
Errors
Illustration 6-13
Review Question
Understating ending inventory will overstate:
a. assets.
c. net income.
d. equity.
Slide
6-36
SO 5 Indicate the effects of inventory errors on the financial statements.
Inventory
Inventory Errors
Errors
Illustration 6-14
Slide
6-37
SO 5 Indicate the effects of inventory errors on the financial statements.
Statement
Statement Presentation
Presentation and
and Analysis
Analysis
Presentation
Statement of Financial Position - Inventory classified as
current asset.
Slide
6-39
SO 6 Compute and interpret the inventory turnover ratio.
Statement
Statement Presentation
Presentation and
and Analysis
Analysis
GAAP permits the use of the last-in, first-out (LIFO) cost flow
assumption for inventory valuation. IFRS prohibits its use. LIFO
is frequently used by U.S. companies for tax purposes. U.S.
regulations require that if LIFO is used for taxes, it must also be
used for financial reporting. (See Appendix 6C.)
Slide
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Understanding
Understanding U.S.
U.S. GAAP
GAAP
When testing to see if the value of inventory has fallen below its
cost, IFRS defines market value as net realizable value. Net
realizable value is the estimated selling price in the ordinary
course of business, less the estimated costs of completion and
estimated selling expenses. In other words, net realizable value
is the best estimate of the net amounts that inventories are
expected to realize (receive). GAAP, on the other hand, defines
market as essentially replacement cost.
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Understanding
Understanding U.S.
U.S. GAAP
GAAP
Slide
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Understanding
Understanding U.S.
U.S. GAAP
GAAP
Slide
6-46
SO 7 Apply the inventory cost flow methods to perpetual inventory records.
Cost
Cost Flow
Flow Methods
Methods in
in Perpetual
Perpetual Systems
Systems
First-In-First-Out (FIFO)
Illustration 6A-2
Answer on
notes page
Slide
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SO 7 Apply the inventory cost flow methods to perpetual inventory records.
Estimating
Estimating Inventories
Inventories
Appendix 6B
Gross Profit Method
The gross profit method estimates the cost of ending
inventory by applying a gross profit rate to net sales.
Illustration 6B-1
Slide
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SO 8 Describe the two methods of estimating inventories.
Estimating
Estimating Inventories
Inventories
Illustration: Kishwaukee Companys records for January show net
sales of $200,000, beginning inventory $40,000, and cost of goods
purchased $120,000. The company expects to earn a 30% gross
profit rate. Compute the estimated cost of the ending inventory at
January 31 under the gross profit method.
Illustration 6B-2
Slide
6-50
SO 8 Describe the two methods of estimating inventories.
Estimating
Estimating Inventories
Inventories
Slide
6-51
SO 8 Describe the two methods of estimating inventories.
Estimating
Estimating Inventories
Inventories
Illustration:
Illustration 6B-4
Slide
6-52
SO 8 Describe the two methods of estimating inventories.
LIFO
LIFO Inventory
Inventory Method
Method
Appendix 6C
Last-In-First-Out (LIFO)
Latest goods purchased are first to be sold.
Slide
6-53
SO 9 Apply the LIFO inventory costing method.
LIFO
LIFO Inventory
Inventory Method
Method
Slide
6-54
SO 9 Apply the LIFO inventory costing method.
LIFO
LIFO Inventory
Inventory Method
Method
Last-In-First-Out (LIFO) Illustration 6C-1
Slide Solution on
6-55 notes page
SO 9 Apply the LIFO inventory costing method.
LIFO
LIFO Inventory
Inventory Method
Method
Last-In-First-Out (LIFO)
Illustration 6C-1
Slide
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SO 9 Apply the LIFO inventory costing method.
Copyright
Copyright
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