Ch6 studyguide

.docx
School
Louisiana State University **We aren't endorsed by this school
Course
ACCT 2001
Subject
Accounting
Date
Oct 17, 2023
Pages
11
Uploaded by ColonelOstrichMaster963 on coursehero.com
Chapter 6: Reporting and Analyzing Inventory Study Guide Learning Objectives: 1. Discuss how to classify and determine inventory. 2. Apply inventory cost flow methods and discuss their financial effects. 3. Explain the statement presentation and analysis of inventory. Learning Objective 1: Discuss how to classify and determine inventory Classifying Inventory Physical inventory taken for 2 reasons: Perpetual System 1. Check ____ACCRUACY_____ of inventory records. 2. Determine amount of ___INVENTORY___ lost (wasted raw materials, shoplifting, or employee theft). Periodic System 1. Determine the inventory ______ON HAND______ 2. Determine the ______COSTS OF GOODS SOLD____ for the period. Taking a Physical Inventory: Involves ____COUNTING___, ____WEIGHING____, or ____MEASURING____ each kind of inventory on hand. Taken, when the business is closed or when business is slow. at ___END___ of the accounting period. ACCT 2001: Ch. 06 Page 1 of 11
Chapter 6: Reporting and Analyzing Inventory Study Guide Determining Ownership of Goods: Inventory Count - should include all items in which the company has legal title. 1. Items in the Warehouse 2. Goods in Transit Purchased goods not yet _____RECEIVED______. Sold goods not yet ______DELIVERED______. Legal title is determined by the ______PASSAGE OF A TITLE_____. 3. Consigned Goods: (CAR EXAMPLE) Goods held for sale by one party although _____OWNERSHIP_____ of the goods is retained by another party. Learning Objective 2: Apply inventory cost flow methods and discuss their financial effects Inventory Costing Unit costs can be applied to quantities on hand using the following costing methods: ACCT 2001: Ch. 06 Page 2 of 11
Chapter 6: Reporting and Analyzing Inventory Study Guide Illustration: Assume that Crivitz TV Company purchases three identical 50-inch TVs on different dates at costs of $700, $750, and $800. During the year Crivitz sold two sets at $1,200 each. These facts are summarized below. 1. Specific Identification: If Crivitz sold the TVs it purchased on February 3 and May 22, then its cost of goods sold is $1,500 ($700 + $800), and its ending inventory is $750. Illustration: Data for Houston Electronics' Astro condensers. ACCT 2001: Ch. 06 Page 3 of 11
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