Chapter 7 Flashcards
Receiving Report
Establishes an initial record of the receipt of inventory
Purchase Order
Authorizes the purchase of the inventory from an authorized vendor
Subsidiary Ledger
Where inventory is recorded in a perpetual inventory system
Physical Inventory
Actual count of inventory - taken at lowest point
LIFO
Cost flow is in the reverse order in which costs were incurred (last in, first out)
Average Cost
Cost flow is an average of the costs
Specific Identification Method
Unit sold is identified with a specific purpose ex vehicle
Gross Profit
Sales - Cost of Goods Sold
Beginning Inventory + Net Purchases
Merchandise Available for Sale
MAFS - ending inventory
Cost of Goods Sold
Lower of Cost or Market
Value is listed at the price which is lower of cost or market
Net Realizable Value
Estimated selling price - direct costs on disposal
Inventory Turnover
Cost of Merchandise Sold/average Inventory (measures the relationship between cost of merchandise sold and the amount of inventory carried during the period)
Number of days’ sales in inventory
Average Inventory/Average daily cost of merchandise sold (rough measure of the length of time it takes to acquire, sell, and replace the inventory)
Retail Method of Inventory Costing
A ratio of cost to retail price is used to convert ending inventory at retail to estimate the ending inventory
Gross Profit Method of inventory Costing
Uses the estimated gross profit for the period to estimate the inventory at the end if the period
3 security measures to safeguard inventory
- Store inventory in areas that are restricted to authorized employees
- Lick high prices inventory in cabinet3. Use two way mirrors, cameras, security tags and guards
Begin inventory is 23 units at $20, purchase 1 is 25 units at $22 sale is 36 units, purchase 2 is 18 units at $25, sale 2 is 20 units
Using perpetual inventory determine CGS and ending inventory using FIFO and LIFO
Sales were $575,000 and CMS was $400,000
Estimate cost of merchandise sold based on an estimated gross profit rate of 40%
Given:beginning inventory at cost if $300,000 and retail of $400,000 and net purchases at cost of $600,000 and retail of $1,200,000 with sales of $900,000
Determine cost if ending inventory by the retail method
Beginning inventory 25 units at $85
Purchase 1 50 units at $90
Purchase 2 60 units at $95
Purchase 3 35 units at $100
Using periodic inventory with 40 units left determine ending inventory using FIFO LIFO and. average
