Chapter 6 - Inventory and cost of goods sold. After completing this chapter, students will be able to: Trace the flow of inventory costs from manufacturing companies to merchandising companies, understand how cost of goods sold is reported in a multiple-step income statement, determine the cost of goods sold and ending inventory using different inventory cost methods, explain the financial statement effects and tax effects of inventory cost flow assumptions, | Inventory and Cost of Goods Sold Chapter 6 1 Learning Objectives Trace the flow of inventory costs from manufacturing companies to merchandising companies Understand how cost of goods sold is reported in a multiple-step income statement Determine the cost of goods sold and ending inventory using different inventory cost methods Explain the financial statement effects and tax effects of inventory cost flow assumptions Learning Objectives Record inventory transactions using a perpetual inventory system Apply the lower-of-cost-or-market method for inventories Analyze management of inventory using the inventory turnover ratio and gross profit ratio Record inventory transactions using a periodic inventory system Determine the financial statement effects of inventory errors Part A Understanding Inventory and Cost of Goods Sold Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 6-4 In this section, we introduce the concept of inventory and demonstrate the different methods used to calculate the cost of inventory for external reporting. 4 Learning Objective 1 Trace the flow of inventory costs from manufacturing companies to merchandising companies Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 6-5 Inventory Includes items a company intends for sale to customers Also includes items that are not yet finished products Reported as a current asset Cost of goods sold: Cost of the inventory that is sold during the period Inventory includes items a company intends for sale to customers. You already are familiar with several types of inventory—clothes at The Limited, shoes at Payless Shoe Source, grocery items at Publix Super Markets, digital equipment at Best Buy, building supplies at The Home Depot, and so on. Inventory also includes items that are not yet finished products. | Inventory and Cost of Goods Sold Chapter 6 1 Learning Objectives Trace the flow of inventory costs from manufacturing companies to merchandising companies Understand how cost of goods sold is reported in a multiple-step income statement Determine the cost of goods sold and ending inventory using different inventory cost methods Explain the financial statement effects and tax effects of inventory cost flow assumptions Learning Objectives Record inventory transactions using a perpetual inventory system Apply the lower-of-cost-or-market method for inventories Analyze management of inventory using the inventory turnover ratio and gross profit ratio Record inventory transactions using a periodic inventory system Determine the financial statement effects of inventory errors Part A Understanding Inventory and Cost of Goods Sold Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. 6-4 In this .
