tailieunhanh - Lecture College accounting (13/e): Chapter 17 - Price, Haddock, Farina

Chapter 17 - Merchandise inventory. After reading this chapter, you should be able to: Compute inventory cost by applying four commonly used costing methods, compare the effects of different methods of inventory costing, compute inventory value under the lower of cost or market rule, estimate inventory cost using the gross profit method, estimate inventory cost using the retail method, define the accounting terms new to this chapter. | 1- McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Merchandise Inventory Section 1: Inventory Costing Methods Chapter 17 Section Objectives Compute inventory cost by applying four commonly used costing methods. Compare the different methods of inventory costing. Based on a running total of number of units. Uses point-of-sale cash registers and scanners. Perpetual Inventory Periodic Inventory Based on a periodic count of goods on hand. Requires a physical inventory (count). Periodic inventory is the method used in this chapter. Two Types of Inventory System Specific Identification Method Average Cost Method FIFO Method LIFO Method The methods used to assign costs to inventory are based on assumptions about the physical flow of goods. Compute inventory cost using four common methods Objective 1 A method of inventory costing based on the actual cost of each piece of merchandise. Automobile dealers, and merchants who deal with items . | 1- McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. Merchandise Inventory Section 1: Inventory Costing Methods Chapter 17 Section Objectives Compute inventory cost by applying four commonly used costing methods. Compare the different methods of inventory costing. Based on a running total of number of units. Uses point-of-sale cash registers and scanners. Perpetual Inventory Periodic Inventory Based on a periodic count of goods on hand. Requires a physical inventory (count). Periodic inventory is the method used in this chapter. Two Types of Inventory System Specific Identification Method Average Cost Method FIFO Method LIFO Method The methods used to assign costs to inventory are based on assumptions about the physical flow of goods. Compute inventory cost using four common methods Objective 1 A method of inventory costing based on the actual cost of each piece of merchandise. Automobile dealers, and merchants who deal with items having a large unit cost or one-of-a- kind items may account for their inventory by this method. Specific Identification Method If the company’s inventory is composed of many similar items, it may be advantageous to use the average cost method to value the inventory. With this method, the average cost of all the similar items is used to value the ending inventory. Average Cost Method 1. Add the total number of units purchased plus the beginning inventory. 2. Calculate the total cost by adding the cost of beginning inventory plus purchases. 3. Divide the total cost by the number of units to determine the average cost of each item. Steps used in determining the value of the inventory using the average cost method: $20, (total cost) 1000 (number of units) = $ average cost of each item Average Cost Method Assumes that merchants sell the oldest items first. The merchandise on hand at any given time is usually the most recently purchased item. The cost of ending