After studying this chapter you will be able to understand: What accounting principle most guides the allocation of cost of goods available for sale between ending inventory and cost of goods sold? Describe one advantage for each of the inventory costing methods: specific identification, FIFO, LIFO, and weighted average; when costs are rising, which method reports higher net income LIFO or FIFO? | Inventories and Cost of Sales Chapter 6 PowerPoint Editor: Beth Kane, MBA, CPA Copyright @ 2015 McGraw Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 6: Inventories and Cost of Sales 06-C1: Determining Inventory Items 2 Determining Inventory Items Merchandise inventory includes all goods that a company owns and holds for sale, regardless of where the goods are located when inventory is counted. Goods in Transit Goods Damaged or Obsolete Goods on Consignment C1 Items requiring special attention include: 3 Merchandise inventory includes all goods that a company owns and holds for sale. This rule holds regardless of where the goods are located when inventory is counted. Certain inventory items require special attention, including goods in transit, goods on consignment, and goods that are damaged or obsolete. FOB Destination Point Public Carrier Seller Buyer Goods in Transit Public Carrier Seller Buyer FOB Shipping Point Ownership passes to the buyer here. C1 4 Does a purchaser’s inventory include goods in transit from a supplier? The answer is that if ownership has passed to the purchaser, the goods are included in the purchaser’s inventory. We determine this by reviewing the shipping terms: FOB destination or FOB shipping point. Goods purchased FOB shipping point are included in the buyer’s inventory when the items are shipped. Goods purchased FOB destination are not included in the buyer’s inventory until they arrive at their destination. Goods on Consignment Merchandise is included in the inventory of the consignor, the owner of the inventory. C1 5 Goods on consignment are goods shipped by the owner, called the consignor, to another party, the consignee. A consignee sells goods for the owner. The consignor continues to own the consigned goods and reports them in its inventory. The consignee never includes consigned goods in inventory. Goods Damaged or Obsolete Damaged | Inventories and Cost of Sales Chapter 6 PowerPoint Editor: Beth Kane, MBA, CPA Copyright @ 2015 McGraw Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Chapter 6: Inventories and Cost of Sales 06-C1: Determining Inventory Items 2 Determining Inventory Items Merchandise inventory includes all goods that a company owns and holds for sale, regardless of where the goods are located when inventory is counted. Goods in Transit Goods Damaged or Obsolete Goods on Consignment C1 Items requiring special attention include: 3 Merchandise inventory includes all goods that a company owns and holds for sale. This rule holds regardless of where the goods are located when inventory is counted. Certain inventory items require special attention, including goods in transit, goods on consignment, and goods that are damaged or obsolete. FOB Destination Point Public Carrier Seller Buyer Goods in Transit Public Carrier .
