Chapter 9 - Inventories and cost of goods sold. This chapter presents the following content: Inventory costs, inventory systems - periodic, cost flow assumptions, cost flow assumptions, first-in first-out, weighted average,. | Accounting for Inventories Inventory Costs All expenditures incurred Inventory Costs All expenditures incurred to bring the item to its Inventory Costs All expenditures incurred to bring the item to its existing condition and location Costs include Invoice cost Shipping Cash discounts Purchases allowances Inventory Systems - Periodic Compute inventory balance at end of each accounting period Compute cost of goods sold at accounting period end Inventory Systems - Perpetual Compute cost of goods sold at each sale Compute new inventory balance at each sale Cost Flow Assumptions Only with specific identification do we attempt to match the actual movement of product through the business with the movement of costs through the accounting system Cost Flow Assumptions With other inventory cost methods, we make an assumption of the movement of costs through the accounting system. This "flow" of costs through the system need not match the movement of product through the business. Cost Flow . | Accounting for Inventories Inventory Costs All expenditures incurred Inventory Costs All expenditures incurred to bring the item to its Inventory Costs All expenditures incurred to bring the item to its existing condition and location Costs include Invoice cost Shipping Cash discounts Purchases allowances Inventory Systems - Periodic Compute inventory balance at end of each accounting period Compute cost of goods sold at accounting period end Inventory Systems - Perpetual Compute cost of goods sold at each sale Compute new inventory balance at each sale Cost Flow Assumptions Only with specific identification do we attempt to match the actual movement of product through the business with the movement of costs through the accounting system Cost Flow Assumptions With other inventory cost methods, we make an assumption of the movement of costs through the accounting system. This "flow" of costs through the system need not match the movement of product through the business. Cost Flow Assumptions First-In, First-Out Cost Flow Assumptions First-In, First-Out Earliest goods assumed to be first units sold Cost Flow Assumptions First-In, First-Out Earliest goods assumed to be first units sold Inventory made up of latest goods acquired Cost Flow Assumptions Last-In, First-Out Cost Flow Assumptions Last-In, First-Out Newest goods assumed to be first units sold Cost Flow Assumptions Last-In, First-Out Newest goods assumed to be first units sold Inventory made up of earliest goods acquired Cost Flow Assumptions Average cost Cost Flow Assumptions Average cost Cost of items sold is the weighted average of costs incurred Cost Flow Assumptions Average cost Cost of items sold is the weighted average of costs incurred Inventory is the weighted average of costs incurred Inventory Example Data Jan. 1 Beg Inven. 200 $ $ Apr. 10 Purchase 700 3, Oct. 23 Purchase 400 2, Available 1,300 $6, Merchandise Sales May 5 500 Dec. 19 300 Total 800 First-In .
