Chapter 52 Comparison of Perpetual and Periodic Inventory Systems
Chapter 53 Inventory Accounting Terms Sales Sales Returns and Allowances Sales Discounts Purchase Returns and Allowances Purchase Discounts Freight-In Delivery Expense(Freight-out) Cost of Goods Sold
Chapter 54 Shipping Terms Buyerpays FOB Shipping Point: Buyer pays to get the goods to the destination. Seller pays FOB Destination: Seller pays to get the goods to the destination.
Chapter 55 Accounting for Common Inventory Transactions Six common transactions are related to accounting for inventory: a.Purchasing inventory from a supplier b.Paying for freight on purchases c.Returning inventory to a supplier d.Selling inventory to a customer e.Accepting returns of inventory from a customer f.Paying on account for purchases of inventory The next few slides will show examples of journal entries for the above transactions.
Chapter 56 Purchasing Inventory From a Supplier On August 1, Marcias Boutique purchased 12 dresses at $50 each from a supplier, Kwon, Inc. The credit terms are 2/10, n/30 and the shipping terms are FOB shipping point.
Chapter 57 Paying for Freight-In on Purchases On August 3, Marcia receives and pays the $22 freight bill on the dresses purchased on August 1.
Chapter 58 Returning Inventory to a Supplier On August 5, Marcias Boutique returned a dress to Kwon because the dress had a fabric flaw.
Chapter 59 Selling Inventory to a Customer Marcias Boutique sells three dresses for cash ($110 per dress) on August 7. Because the company uses a perpetual inventory system, two journal entries are required.
Chapter 510 Accepting Returns of Inventory from a Customer On August 8, one customer who bought a dress on August 7 decided to return it. Marcias Boutique will prepare two journal entries to record the return.
Chapter 511 Paying on Account for Purchases of Inventory On August 11, Marcias paid for the dresses purchased from Kwon. The credit terms allow Marcias Boutique to deduct 2% from the total amount owed if payment is made by August 11.
Chapter 512 Inventory Cost Flow Methods Specific Identification First In First Out Last In First Out Weighted Average
Chapter 513 Cost Flow Example The operations of University Bookstore are used to explore the topic of inventory costing. Following are inventory data for January for a Principles of Marketing textbook. The text is a paperback version and, thus, there are no used copies of the text available for sale. To simplify the example, it is assumed that University Bookstore is only open two days in January; all sales, therefore, occur on those two days. 1/ 1 Beginning inventory 100 copies @ $30 each $ 3,000 1/ 8 Purchased 400 copies @ $35 each 14,000 1/14 Sold 360 copies 1/18 Purchased 70 copies @ $39 each 2,730 1/22 Sold 180 copies
Chapter 519Chapter 519 Compute the ending inventory for Rayborn Company using the LIFO perpetual method based on the following information. On January 1 Rayborn Company had 25 units at a cost of $50 each. DatePurchasesSales Feb. 1020 units @ $56 April 5 32 units June 1926 units @ $60 Aug. 29 15 units Nov. 1010 units @ $63
Chapter 521 Retail Inventory Method Often used in small businesses to estimate the amount of inventory on hand. Should be a consistent relationship between the costs and selling prices of a companys products. Can be used with FIFO, LIFO, or average cost flow assumptions.
Chapter 525 Relevant Ratios Inventory Turnover Ratio = Cost of Goods Sold ÷ Average Inventory Age of Inventory = 360 days ÷ Inventory Turnover Ratio The inventory turnover ratio indicates the number of times that a company sells or "turns over" its inventory each year. Inventory age indicates the average period required to sell an item of inventory.