Chapter 9 Inventories and Cost of Goods Calculations.
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Chapter 9 Inventories and Cost of Goods Calculations
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Transcript of Chapter 9 Inventories and Cost of Goods Calculations.
Chapter 9Inventories and Cost of
Goods Calculations
9-1 Comparison of Journal Entries under Perpetual and Periodic Inventory Systems
23,000
22,770
230
Cash
Sales Discounts
Accounts Receivable23,000
22,770
230
Cash
Sales Discounts
Accounts Receivable
Cash received on account with a discount.
July 25
No entry
500
500Merchandise Inventory
Cost of Goods Sold
1,000
1,000Sales Returns and Allowances
Accounts Receivable1,000
1,000Sales Returns and Allowances
Accounts Receivable
Return on merchandise.
July 18
No entry
12,000
12,000Cost of Goods Sold
Merchandise Inventory
24,000
24,000Accounts Receivable
Sales Revenue24,000
24,000Accounts Receivable
Sales Revenue
Sale of merchandise on credit.
July 16
37,240
760
38,000Accounts Payable
Cash
Purchase Discounts
37,240
760
38,000Accounts Payable
Cash
Merchandise Inventory
Payment on account with a discount.
July 14
200
200Freight-in
Accounts Payable200
200Merchandise Inventory
Accounts Payable
Freight costs on purchases.
July 8
2,000
2,000Accounts Payable Purchase Returns and Allowances
2,000
2,000Accounts Payable
Merchandise Inventory
Purchase returns and allowances.
July 6
40,000
40,000Purchases
Accounts Payable40,000
40,000Merchandise Inventory
Accounts Payable
Purchase of merchandise on credit.
July 5
Periodic Inventory SystemPerpetual Inventory SystemTransaction
9-2 Cost of Goods Sold
CALCULATION OF COST OF GOODS PURCHASED
Purchases $36,000
Less: Purchase returns and allowances
Purchase discounts
$7,000
3,000 10,000
Net purchases 350,000
Add: Freight-in 5,000
Cost of goods purchased $355,000
CALCULATION OF COST OF GOODS SOLD
Inventory, January 1 $40,000
Cost of goods purchased 355,000
Cost of goods available for sale 395,000
Inventory, December 31 50,000
Cost of goods sold $345,000
9-3 Components of the Income Statement using the Periodic Inventory System
Sales
- Sales returns and allowances
- Sales discounts
= Net Sales
Purchases
- Purchase returns and allowances
- Purchase discounts
= Net purchases
+ Freight-in
= Cost of goods purchased
Beginning Inventory
+ Cost of goods purchase
= Cost of goods available for sale
- Ending inventory
= Cost of goods sold
Net Sales
- Cost of goods sold
= Gross profit
Selling expenses (including freight-out)
+ Administrative expenses
= Total operating expenses
Gross profit
- Total operating expenses
= Net income
Net SalesNet Sales
Cost of Cost of Goods Goods SoldSold
Gross Gross ProfitProfit
OperatinOperating g
ExpensesExpenses
Net Net IncomeIncome
9-4 Costing Ending Inventory using FIFO, LIFO and Average Cost Methods – Periodic System
Your company provided the following data for the year:
Units Unit Cost Total Cost
January 1 … 80 $15.00 $1,200
March 15 purchase … 60 16.00 960
June 20 purchase … 100 17.50 1750
October 25 purchase … 90 18.00 1,620
Units and goods available … 330 $5,530
Ending inventory (December 31) consists of 110 units.
Complete the costing of ending inventory under FIFO, LIFO, and average cost.
9-4 Costing Ending Inventory using FIFO, LIFO and Average Cost Methods – Periodic System (continued)
FIFO LIFO AVERAGE
Cost of goods available for sale …. $5,530 $5,530 $5,530
LESS: Ending Inventory (FIFO)
Dates: Units X Cost
October 25 (90 X $18,000) = $1,620
June 20 (20 X $17.50) = 350 1,970
LESS: Ending Inventory (LIFO)
Dates: Units X Cost
Jan 1 (80 X $15.00) = $1,200
Mar 15 (30 X $16.00) = 480 1,680
LESS: Ending Inventory (Aver. Cost)
Wt. Aver. Cost + Units = Unit Cost
$5,530 + 330 = $16.76 (r)
$16.76/unit X 110 units 1,844 (r)
Cost of Goods Sold …. $3,560 $3,850 $3,686
Balance Balance Sheet Sheet EffectsEffects
9-5 Effects of Inventory Errors
Inventory Error Cost of Goods Sold Net Income
Beginning inventory understated Understated Overstated
Beginning inventory overstated Overstated Understated
Ending inventory understated Overstated Understated
Ending inventory overstated Understated Overstated
SELF-CORRECTING ERRORS OVER TWO PERIODS
Current Period Next Period
Ending Inventory Error Beginning Inventory Error
An error’s effect on income this period
Reverse effect on net income in this period
CORRECT TOTAL INCOME OVER TWO PERIODS
becomesbecomes
offsetsoffsets
