Reporting and Analyzing Inventory Study Objectives. • Describe the steps in determining inventory quantities. • Explain the basis of accounting for inventories and apply the inventory cost flow methods under a periodic inventory system. • Explain the financial statement and tax effects of each of the inventory cost flow assumptions. • Explain the lower of cost or market basis of accounting for inventories. • Compute and interpret the inventory turnover ratio. •
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Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold Nonetheless, the above formula only applies to the periodic inventory system. According to Kimmel, Weygandt, and Kieso (2011) companies have two systems to keep inventory, one is the periodic system—formula described above—and the other is the perpetual system. In the perpetual system one cannot calculate the cost of goods as easily, but instead special software is used—i.e a computer system with capacity
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Inventory Proposal Part Two of Three Team A QRB 501 March 07, 2012 Terrance Feravich The research discussion is toward the data collection, which converts times series data for McDonald’s Fast Food Restaurant inventory analysis and University of Phoenix summer seasonal index. The raw data represents inventory data over a four year time. In this assignment the B team will illustrate statistical information, discuss the inventory systems and problems, explain the
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In this scenario, we have two competing manufacturing companies; Company A and Company B, Company A having larger inventory than Company B. Company A (with larger inventory) will have the following advantages: * Lower ordering costs: For the raw materials they will be able to spread the fixed ordering costs over a larger amount of goods. * Quantity discounts: For the raw materials they would be better positioned to request quantity discounts because they would be ordering in bulk amounts
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and disadvantages of accounting for inventory under the perpetual inventory system The major difference between the two methods of recording for inventory accounting systems (perpetual and periodic) is the extent to which stock movements are monitored. The physical system of recording for inventory does not keep records of the movements of stock. The only information in the ledger concerning merchandise is the recording in the stock account of the total inventory determined by a physical stock-take
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CH.8 -Inventory Classification: * Merchandise inventory- only inventory account that appears in the financial statements. -Perpetual inventory system- continuously tracks changes in the Inventory account. Records all purchases and sales of goods directly in the Inventory account as they occur. * Perpetual inventory overages and shortages generally represent a misstatement of cost of goods sold. Debi t Inventory over or short, credit Inventory. -Periodic inventory system- records all
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TRUE-FALSE STATEMENTS 8. Closing entries are not needed if the business plans to continue operating in the future and issue financial statements each year. 9. The dividends account is closed to the Income Summary account in order to properly determine net income (or loss) for the period. 10. After closing entries have been journalized and posted, all temporary accounts in the ledger should have zero balances. 11. Closing revenue and expense accounts to the
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payment | Cash | | Accounts Rec | Add interest rev (post discount) | Cash | | Accounts Rec | | Interest Revenue | Sales Returns | Sales Returns | | Accounts rec | Inventory | | COGS | Adjusting Entries | Sales returns (estimated - returns) | | Allowance for sales returns | Inventory (estimated returns) | | COGS | Sale of Receivables | Cash (% x Sold Accounts) | Loss on sale of receivables (to balance) | Receivable from factor (fair value-fee) | | Accounts
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customer. Retailers deal with an inventory: all the goods (products) they have for sale. They account for inventory purchases and sales in one of two ways: Periodic and Perpetual. As the names suggest these methods refer to how often the inventory account balances are updated. In a Periodic system, inventory account balances are updated once a year (some companies may do it more often, but all must do so at least once per year). In a Perpetual system, inventory account balances are updated after
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Asset Valuation Introduction The intent of this paper is to describe to the CEO Team B’s recommendation for reporting and valuing assets. Included in this paper is a synopsis of the company’s business plan and the related inventory control and capitalization policy. The authors’ of this paper will also justify why each policy was chosen and evaluate how the policies assists our business to meet its goals. Finally, alternative methods will be discussed with regard to why they were not chosen
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