(BQ) Part 2 book “Financial accounting” has contents: Reporting and interpreting cost of goods sold and inventory, reporting and interpreting liabilities, reporting and interpreting bond securities, analyzing financial statements, and other contents. | Reporting and Interpreting Cost of Goods Sold and Inventory T he Harley-Davidson eagle trademark was once known best as a popular request in tattoo parlors. Now, Harley-Davidson dominates the heavyweight motorcycle market in North America with a percent market share. Harley is also a market leader in Canada, Japan, and Australia and is a growing presence in Europe. But the heavyweight king took a major hit from the worldwide economic downturn that started in 2008. Harley responded with an aggressive plan to enhance profitability through continuous improvement in manufacturing, product development, and business operations. These plans are aimed at shortening product development lead times and implementing flexible manufacturing at its Wisconsin, Missouri, and Pennsylvania facilities, which reduce costs and allow the company to better respond to the needs of the dealer network. Controlling inventory quality, quantities, and cost are key to maintaining gross profit margin. Introducing new products to stay ahead of major competitors Honda and BMW and providing a premium dealer experience to all of Harley’s customers will also increase gross margin. Finally, selecting appropriate accounting methods for inventory can have a dramatic effect on the amount Harley-Davidson pays in income taxes. Harley produced strong financial Lea r ni ng Obj ec ti ves After studying this chapter, you should be able to: 7-1 Apply the cost principle to identify the amounts that should be included in inventory and the expense matching principle to determine cost of goods sold for typical retailers, wholesalers, and manufacturers. 7-2 Report inventory and cost of goods sold using the four inventory costing methods. 7-3 Decide when the use of different inventory costing methods is beneficial to a company. 7-4 Report inventory at the lower of cost or market (LCM). 7-5 Evaluate inventory management using the inventory turnover ratio. 7-6 Compare companies
