summarized. Foreign Literature One of the biggest challenges of an enterprise is to maintain the appropriate inventories and control its cost of sales. One businessman states that success in business is more than good products; success depends on assigning and monitoring costs of inventory and applying sound inventory management procedures. (Baysa, 2014 p.203) PAS 2, paragraph 6, defines inventories as “assets which are held for sale in the ordinary course of business, in the process of production for
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VALUATION OF I NVE NTOR I E S : A COST-BASIS APPROAC H LEARNING OBJECTIVES After studying this chapter, you should be able to: •1 •2 •3 •4 •5 •6 •7 •8 •9 •10 Identify major classifications of inventory. Distinguish between perpetual and periodic inventory systems. Identify the effects of inventory errors on the financial statements. Understand the items to include as inventory cost. Describe and compare the cost flow assumptions used to account for inventories. Explain the significance and use
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goods in inventory. By reporting and analyzing such information, a company can help to predict financial performance and the best plan to achieve results. Such inventory valuation methods include: Average Cost Method; FIFO; and LIFO. The inventory valuation methods use two different inventory systems – perpetual and periodic. The perpetual inventory system is used when a company reports the cost of goods sold as those goods are sold throughout the accounting period. The periodic inventory system
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A retail firm would normally use an inventory account titled finished goods inventory goods in process inventory raw materials inventory merchandise inventory 2. MC.07-18 A manufacturing company typically has how many inventory accounts? 1 3 2 4 3. MC.07-19 A manufacturing firm would not normally have an account titled raw materials inventory finished goods inventory merchandise inventory goods in process inventory 4. MC.07-20 Which of the following
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CHAPTER 8 Valuation of Inventories: A Cost-Basis Approach ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC) Topics Questions Brief Exercises Exercises Problems Concepts for Analysis 1, 2, 3, 5 1. Inventory accounts; 1, 2, 3, 4, determining quantities, 5, 6, 8, 9 costs, and items to be included in inventory; the inventory equation; balance sheet disclosure. 1, 3 1, 2, 3, 4, 5, 6 1, 2, 3 2. Perpetual vs. periodic. 2 9, 13, 17, 20 4, 5, 6 3.
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date. For the latest, authoritative version of these standards, we recommend you consult https://asc.fasb.org/ which is provided by the Financial Accounting Standards Board. End of Preamble [Not Part of the Accounting Standards Codification] 330 Inventory 10 Overall 00 423 Status 423 General 423 Overview and Background 423 General 423 Objectives 423 General 423 Scope and Scope Exceptions 424 General 424 20 Glossary 424 30 Initial Measurement 425 General 425 Subsequent Measurement
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life.” COST ACCOUBTING INFORMATION SYSTEM OF NESTLE INPUT MEASUREMENT BASIS STANDARD COSTING Nestle is using STANDARD COSTING as a base for input measurement Standard costs are usually associated with a company’s costs of direct material, direct labor, and manufacturing overhead. Rather than assigning the actual costs of direct material, direct labor, and manufacturing overhead to a product, nestle’ like many manufacturers assigns the expected or standard cost. This means
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the right “balance” of inventory a challenge? Because it affects the tradeoffs in inventory carrying cost and stock out costs, as well as the after values. 2. What are the four (4) types of inventory classifications? Base, buffer, in transit, and speculative stock. 3. What are the components of inventory carrying costs? Obsolesce costs, inventory shrinkage, storage costs, handling costs, insurance costs, interest costs, taxes. 4. Calculate the inventory carrying cost if weekly demand is 130
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P6-1A Kirk Limited is trying to determine the value of its ending inventory as of February 28, 2012, the company’s year-end. The accountant counted everything that was in the warehouse, as of February 28, which resulted in an ending inventory valuation of $48,000. However, she didn’t know how to treat the following transactions so she didn’t record them. Determine items and amounts to be recorded in inventory. (SO 1), AN (a) On February 26, Kirk shipped to a customer goods costing $800. The goods
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ACCOUNTING FOR INVENTORIES For Merchandising Firms Inventories are valued at cost, net of discounts, and including transportation and other costs (ie: import duties) to prepare the goods for sale. Buying Inventory: * DR Merchandise Inventory, CR Cash/Accounts Payable Selling Inventory: * DR A/R or Cash, CR Revenues * DR Cost of Goods Sold Expense, CR Merchandise Inventory Lower of Cost or Market (LOCOM): * Inventories can sometimes decrease in value while
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