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1、Chapter 5-1Inventories:Basic Valuation Methods&Special Valuation MethodsChapter 5Intermediate Accounting12th EditionKieso,Weygandt,and Warfield Prepared by Coby Harmon,University of California,Santa BarbaraChapter 5-21.1.Describe how inventory accounts are classified.Describe how inventory accounts
2、are classified.2.2.Explain the uses of perpetual and periodic inventory systems.Explain the uses of perpetual and periodic inventory systems.3.3.Identify how inventory quantities are determined.Identify how inventory quantities are determined.4.4.Determine the cost of inventory.Determine the cost of
3、 inventory.5.5.Compute ending inventory and cost of goods sold under specific Compute ending inventory and cost of goods sold under specific identification,FIFO,average cost,and LIFO.identification,FIFO,average cost,and LIFO.6.6.Explain the conceptual issues regarding alternative inventory cost flow
4、 Explain the conceptual issues regarding alternative inventory cost flow assumptions.assumptions.7.7.Understand dollar-value LIFO.Understand dollar-value LIFO.8.8.Explain additional LIFO issues.Explain additional LIFO issues.9.9.Understand inventory disclosures.Understand inventory disclosures.Learn
5、ing ObjectivesLearning ObjectivesChapter 5-310.10.Understand the lower of cost or market method.Understand the lower of cost or market method.11.11.Explain the conceptual issues regarding the lower of cost or Explain the conceptual issues regarding the lower of cost or market method.market method.12
6、.12.Understand purchase obligations and product financing Understand purchase obligations and product financing arrangements.arrangements.13.13.Explain the valuation of inventory above cost.Explain the valuation of inventory above cost.14.14.Use the gross profit method.Use the gross profit method.15
7、.15.Understand the retail inventory method.Understand the retail inventory method.16.16.Explain the conceptual issues regarding the retail inventory method.Explain the conceptual issues regarding the retail inventory method.17.17.Understand the dollar-value retail method.Understand the dollar-value
8、retail method.18.18.Understand the effects of inventory errors on the financial Understand the effects of inventory errors on the financial statements.statements.Learning ObjectivesLearning ObjectivesChapter 5-4Typically represent the largestcurrent asset of manufacturingand retail firms.For many co
9、mpanies inventoriesare a significant portionof total assets as well.Inventory methods and managementpractices can becomeprofit-enhancing tools.Importance of InventoriesImportance of InventoriesChapter 5-5l lMerchandise inventoryMerchandise inventory Goods acquired for resale Goods acquired for resal
10、el lManufacturing inventoryManufacturing inventory Raw materials Raw materials Work-in-process Work-in-process Finished goods Finished goods Manufacturing supplies Manufacturing suppliesl lMiscellaneous inventoryMiscellaneous inventoryInventory CategoriesInventory CategoriesChapter 5-6Flow of Flow o
11、f Inventory CostsInventory CostsMerchandising CompanyManufacturing CompanyChapter 5-7Merchandising CompanyCost of Goods SoldAccounts Payable(or Cash)Merchandise InventoryGoods PurchasedGoods SoldFlow of Inventory CostsFlow of Inventory CostsChapter 5-8Manufacturing CompanyAccounts Payable(or Cash)Ra
12、w Materials InventoryMaterials PurchasedMaterials Used in ProductionTo Work in Process InventoryContinuedContinuedFlow of Inventory CostsFlow of Inventory CostsChapter 5-9Manufacturing CompanyDirect LaborActual Direct LaborManufacturing (Factory)OverheadActual Mfg.Over-headOverhead Applied to Produc
13、tion To Work in Process InventoryLabor Charged to Production To Work in Process InventoryContinuedContinuedFlow of Inventory CostsFlow of Inventory CostsChapter 5-10Manufacturing CompanyWork in Process InventoryMaterials UsedDirect LaborOverhead AppliedFinished Goods InventoryGoods Finished(Manufact
14、ured)Goods Sold to Cost of Goods SoldFlow of Inventory CostsFlow of Inventory CostsChapter 5-11General RuleGeneral RuleAll goods owned by the company on the inventory All goods owned by the company on the inventory date,regardless of their location.date,regardless of their location.Goods in transit
15、depend on the FOB terms.Goods in transit depend on the FOB terms.Goods on consignment.Goods on consignment.Items Included in InventoryItems Included in InventoryChapter 5-12Who Owns the Inventory?Who Owns the Inventory?Chapter 5-13l lInvoice priceInvoice pricel lFreight-inFreight-inl lPurchase disco
16、untsPurchase discountsl lOther costs to get the inventory ready for saleOther costs to get the inventory ready for saleComponents of Inventory CostComponents of Inventory CostChapter 5-14Under the gross price method,a company records the purchase at the gross price,and records the amount of the disc
17、ount in the accounting system only if the discount is taken.Under the net price method,a company records the purchase at its net price,and records the amount of the discount in the accounting system only if the discount is not taken.Purchases DiscountsPurchases DiscountsChapter 5-15To record the pur
18、chaseInventory(or Purchases)1,000Accounts Payable1,000A company purchases$1,000 of goods under terms of 1/10,n/30.To record payment within the discount period:Accounts Payable1,000Purchases Discounts Taken10Cash990To record payment after the discount period:Accounts Payable1,000Cash1,000Purchases Di
19、scounts-Purchases Discounts-Gross Price MethodGross Price MethodChapter 5-16To record the purchase:Inventory(or Purchases)990Accounts Payable990A company purchases$1,000 of goods under terms of 1/10,n/30.To record payment within the discount period:Accounts Payable990Cash990To record payment after t
20、he discount period:Accounts Payable990Purchases Discounts Lost10Cash1,000Purchases Discounts Lost are treated as a financing expense in the Other section of the income statement.Purchases Discounts-Purchases Discounts-Net Price MethodNet Price MethodChapter 5-17Net Price MethodAdjusting entry at the
21、 end of period if discount has expired and invoice is unpaid:Purchases Discounts Lost10Accounts Payable10A company purchases$1,000 of goods under terms of 1/10,n/30.Purchases DiscountsPurchases DiscountsChapter 5-18PERIODIC METHODvs.PERPETUAL METHODInventory Recording MethodsInventory Recording Meth
22、odsChapter 5-19A company using a periodic system does not maintain a continuous record of the physical quantities on hand.Alternative Inventory SystemsAlternative Inventory SystemsChapter 5-20 Beginning Inventory+Purchases(net)+Purchases(net)=Cost of Goods Available for Sale-Ending Inventory =Cost o
23、f Goods Sold =Cost of Goods Sold Calculating Cost of Goods Sold(COGS)Calculating Cost of Goods Sold(COGS)Chapter 5-21Beginning inventoryBeginning inventory+Purchases(net)Purchases(net)-Goods SoldGoods Sold=Ending InventoryEnding InventoryPerpetual Inventory SystemBeginning inventoryBeginning invento
24、ry+Purchases(net)Purchases(net)-Ending InventoryEnding Inventory=Goods SoldGoods SoldPeriodicInventory SystemComparison of SystemsComparison of SystemsChapter 5-22Periodic versus PerpetualPeriodic versus PerpetualChapter 5-23l lAt the end of the accounting period,calculate COGS by At the end of the
25、accounting period,calculate COGS by closing:closing:Purchases,Purchases,Purchases Discount,Purchases Discount,Purchase Returns and Allowances,Purchase Returns and Allowances,Beginning Inventory,and Beginning Inventory,and Record Ending Inventory.Record Ending Inventory.l lCOGS is closed to Income Su
26、mmary.COGS is closed to Income Summary.Periodic SystemPeriodic SystemChapter 5-24Periodic SystemPeriodic SystemChapter 5-25Periodic SystemPeriodic SystemChapter 5-26Periodic SystemPeriodic SystemChapter 5-27Periodic SystemPeriodic SystemChapter 5-28Periodic SystemPeriodic SystemChapter 5-29l lPurcha
27、ses discount and purchase returns and Purchases discount and purchase returns and allowances are allowances are contra-purchases accountscontra-purchases accounts,i.e.,they have a credit balance.i.e.,they have a credit balance.l lPurchases can be recorded using the gross or Purchases can be recorded
28、 using the gross or net method.Periodic SystemPeriodic SystemChapter 5-30The inventory account is continuously updated The inventory account is continuously updated for:for:Perpetual SystemPerpetual SystemChapter 5-31Returns of inventory are Returns of inventory are credited to the inventory credite
29、d to the inventory account.account.Discounts on inventory Discounts on inventory purchases can be recorded purchases can be recorded using the gross or net using the gross or net method.method.Perpetual SystemPerpetual SystemChapter 5-32 Cable TV,Inc.used the gross method gross method to record a pu
30、rchase on March 23 for$50,000 with terms of 2/10,n/30.Payment was made on April 1.Which of the following is included on the April 1 entry?a.Credit Purchases Discount$1,000b.Debit Purchases Discount$1,000c.Credit Inventory$1,000d.Debit Inventory$1,000Perpetual SystemPerpetual SystemChapter 5-33 Cable
31、 TV,Inc.used the gross methodgross method to record a purchase on March 23 for$50,000 with terms of 2/10,n/30.Payment was made on April 1.Which of the following is included on the April 1 entry?a.Credit Purchases Discount$1,000b.Debit Purchases Discount$1,000c.Credit Inventory$1,000d.Debit Inventory
32、$1,000Perpetual SystemPerpetual SystemChapter 5-34Perpetual SystemPerpetual SystemChapter 5-35 Cable TV,Inc.used the Cable TV,Inc.used the net methodnet method to record to record a purchase on March 23 for$50,000 with a purchase on March 23 for$50,000 with terms of 2/10,n/30.Payment was made on ter
33、ms of 2/10,n/30.Payment was made on April 5.Which of the following is included April 5.Which of the following is included on the April 5 entry?on the April 5 entry?a.Credit Purchases Discount$1,000a.Credit Purchases Discount$1,000b.Debit Purchases Discount$1,000b.Debit Purchases Discount$1,000c.Cred
34、it Purchases Discounts Forfeited$1,000c.Credit Purchases Discounts Forfeited$1,000d.Debit Purchases Discounts Forfeited$1,000d.Debit Purchases Discounts Forfeited$1,000Periodic SystemPeriodic SystemChapter 5-36 Cable TV,Inc.used the Cable TV,Inc.used the net methodnet method to record to record a pu
35、rchase on March 23 for$50,000 with a purchase on March 23 for$50,000 with terms of 2/10,n/30.Payment was made on terms of 2/10,n/30.Payment was made on April 5.Which of the following is included April 5.Which of the following is included on the April 5 entry?on the April 5 entry?a.Credit Purchases D
36、iscount$1,000a.Credit Purchases Discount$1,000b.Debit Purchases Discount$1,000b.Debit Purchases Discount$1,000c.Credit Purchases Discounts Forfeited$1,000c.Credit Purchases Discounts Forfeited$1,000d.Debit Purchases Discounts Forfeited$1,000d.Debit Purchases Discounts Forfeited$1,000Periodic SystemP
37、eriodic SystemChapter 5-37Represents a finance charge and is included with misc.expensesPeriodic SystemPeriodic SystemChapter 5-38 Cost of Goods Sold is Cost of Goods Sold is closed to Income Summary closed to Income Summary during the usual closing during the usual closing entries at the end of the
38、 entries at the end of the period.period.Perpetual SystemPerpetual SystemChapter 5-39l lCost basis Cost basis l lDepartures from cost Departures from cost Lower of cost or market(LCM)Lower of cost or market(LCM)Net realizable value Net realizable value Replacement cost Replacement cost Current cost
39、Current cost Selling price Selling priceInventory Values-Unit CostInventory Values-Unit CostChapter 5-40Specific cost identificationSpecific cost identificationAverage costAverage costFirst-in,first-out(FIFO)First-in,first-out(FIFO)Last-in,first-out(LIFO)Last-in,first-out(LIFO)Inventory Cost Flow Me
40、thodsInventory Cost Flow MethodsChapter 5-41l lSpecific cost of each Specific cost of each inventory item must be inventory item must be known.known.l lOpportunity to Opportunity to manipulate income by manipulate income by selection of items at time selection of items at time of sale.of sale.Specif
41、ic Cost IdentificationSpecific Cost IdentificationChapter 5-42100units$10 per unitApr.1Apr.10Apr.2080 units$11 per unit70 units$12 per unitOn April 27,sold 90 units from the beginning inventory,50 units from the April 10 purchase.Specific IdentificationSpecific IdentificationChapter 5-43100units$10
42、per unitApr.1Apr.10Apr.2080units$11 per unitApr.200 units$12 per unit90 units$10 per unitApr.150 units$11 per unitApr.1070units$12 per unit10units$10 per unit30units$11 per unit70units$12 per unitSold 90Sold 50Ending inventory.=$100=330=840$1,270Cost of Goods Sold.$1,450=$900=550=0Specific Identific
43、ationSpecific IdentificationChapter 5-44100units$10 per unitApr.1Apr.10Apr.2030 units$11 per unitApr.20Apr.1Apr.1070 units$12 per unit10units$10 per unit80 units$11 per unit70units$12 per unitEnding inventory.Goods available for sale.=$1,000=880=840$2,720=$100=330=840$1,270$1,480Cost of Goods Sold.S
44、pecific IdentificationSpecific IdentificationChapter 5-45l lThe periodic inventory system uses the The periodic inventory system uses the weighted-averageweighted-average unit cost method.unit cost method.l lThe perpetual inventory system uses the The perpetual inventory system uses the moving-avera
45、gemoving-average unit cost method.unit cost method.Average Cost MethodAverage Cost MethodChapter 5-46Weighted-average cost(WAC)per unitWeighted-average cost(WAC)per unit Beginning inventory cost +Current purchase cost Beginning inventory cost +Current purchase cost Beginning inventory units+Current
46、purchase unitsBeginning inventory units+Current purchase units Ending InventoryEnding InventoryEnding Inv.=Units in Ending Inv.x WAC per UnitEnding Inv.=Units in Ending Inv.x WAC per UnitCost of Goods SoldCOGS=Units Sold x WAC per UnitCOGS=Units Sold x WAC per Unit Weighted-AveragePeriodic MethodPer
47、iodic MethodChapter 5-47The following schedule shows the mouse pad inventory for Computers,Inc.for September.The physical inventory count shows 800800 mouse pads in ending inventory.Use the weighted-average periodic method to Use the weighted-average periodic method to determine:determine:(1)Ending
48、inventory cost.(1)Ending inventory cost.(2)Cost of goods sold.(2)Cost of goods sold.Weighted-AveragePeriodic MethodPeriodic MethodChapter 5-48Weighted-AveragePeriodic MethodPeriodic MethodChapter 5-49GAS 1,550-EI(800)COGS 750Weighted-AveragePeriodic MethodPeriodic MethodChapter 5-50$8,370 1,550 =$5.
49、40 weighted-averageWeighted-AveragePeriodic MethodPeriodic MethodChapter 5-51$8,370 1,550 =$5.40 weighted-averageWeighted-AveragePeriodic MethodPeriodic MethodChapter 5-52The following schedule shows the mouse pad inventory for Computers,Inc.for September.The physical inventory count shows 800800 mo
50、use pads in ending inventory.Use the moving-average periodic method to Use the moving-average periodic method to determine:determine:(1)Ending inventory cost.(1)Ending inventory cost.(2)Cost of goods sold.(2)Cost of goods sold.Moving-AverageMoving-AveragePerpetual ExamplePerpetual ExampleChapter 5-5