Inventory Flashcards
Cost to Retail Ratio = COST/Retail
Cost = Inventory + Purchases
Retail = Inventory + Purchases + Net Additional Markups
Cost/Retail
Ending Inventory = Inventory + Purchases + Net Additional Markups - Net Markdowns - Sales Revenue
COGS = Beginning Inventory + Purchases (when ending inventory is not provided)
True
Estimated COGS
= Sales - Gross Profit
COGS%
100-Gross Profit %
Goods once ACTUALLY SHIPPED means title transferred to the customer. If not, include in vendor’s inventory.
True
Dollar Value LIFO
Uses price index (Index = Ending Inventory at CY cost)
_____________________________
Ending Inventory at Base Year cost
NRV or Ceiling =
Selling Price - Cost of disposal
Floor Limitation
= NRV - Profit
FIFO
Cost of goods sold balance is the same in both perpetual and/or periodic inventory system
This method must also be used for financial reporting purposes if used for tax purposes.
LIFO (LFT or left)
__________ Method that uses historical sales margins to estimate ending inventory.
Gross Profit
GAAP allows the ____________ for interim financial statements or to determine inventory that is destroyed
Gross profit method
The operating cycle is Days’ supply in inventory + Avg receivables collection period. Since the inventory turnover increased, as a result, the days’ supply in inventory decreased. The avg receivables collection period remained the same; therefore, there was a decrease in the operating cycle.
True
LIFO follows LCM
Lower of Cost or Market (market - middle value)
FIFO follows LCNRV
Lower of Cost or NRV
Moving Avg is used for Perpetual
True
Weighted Avg is used for Periodic
True
FIFO and Specific Identification - same result for perpetual and periodic inventory
True
FIFO
Lowest COGS, Highest Ending Inventory, highest profits
Gross Profit % + COGS % = 100%
True
FIFO - Manufacturing situations, manufacturing firm
Most manufacturing operations process and sell inventory in the order it is received, that is the first items in are the first to be sold, which is FIFO.
Cost of Sales = Cost of Goods sold
True
Consignor (wholesaler) retains ownership. Inventory includes transportation costs. BS reports unsold inventory at year end.
IS - Sales revenue, COGS and selling expenses.
Consignee (retailer/dealer) has possession, BS- no inventory reported, reimbursable costs (receivable).
IS - Commission revenue
Goods held on consignment are not included by COmpany as they are owned by consignor (not to be included in ending inventory)
True
Although ending inventory is $10,000, the amount is included in the $400,000 of inventory purchased. Under cash-basis accounting, inventory is expensed when purchased with cash, therefore, no adjustment is required.
True
CONSIGNEE also known as the retailer/dealer __________________
–Has physical possession of merchandise
–Reports Commission Revenue
Consignor (seller) reports consigned goods as inventory, has legal ownership of merchandise, bears the risk of unsold merchandise, reports sales revenue and COGS
True
FIFO
Perpetual and Periodic COGS calc result will be same example $5,900 and $5,900
LIFO
COGS (expense is) higher and Current tax liability is lower
In a periodic inventory system, the weighted avg method results in NI that is lower than FIFO net income and higher than LIFO net income when prices are rising
In perpetual inventory system, the moving avg method results in NI that is lower than FIFO NI and Higher than LIFO NI when prices r rising
Selling expense is period cost /expense
PRODUCT (INventoriable cost)
While an agent (consignee) will hold and sell goods on behalf of the consignor, until the Inventory is sold, the seller (consignor) will include in his inventory because title and risk of loss are retained by the consignor.
Goods held on consignment should be included in ending inventory of the consignor.
Balance sheet should include for Consigned inventory
=Inventory shipped plus freight paid
Perpetual JEs
At the time of purchase
_____________________________
Inventory Dr. XX
A/P or Cash XX
At the time of Sale
__________________
Cash or A/R Dr. XX
Sales Revenue XX
COGS Dr. XX
Inventory XX
Periodic JEs
At the time of purchase
______________________________
Purchases Dr. XX
A/P or Cash XX
At the time of Sale
__________________________
Cash or A/R Dr. XX
Sales Revenue XX
At year-end
______________________
Ending Inventory Dr. XX
COGS (plug) Dr. XX
Purchases XX
