SU #7: Inventories

Question 1

7.1 - Inventory Fundamentals
Definition:

Define inventories

Answer 1

The total of tangible personal property

1) Held for sale in the ordinary course of business,

2) In the form of work-in-process to be completed and sold in the ordinary course of
business, or

3) To be used up currently in producing goods or services for sale.

Question 2

7.1 - Inventory Fundamentals
Sources of Inventories:

Calculate goods available for sale for a retailer

Answer 2

Beginning inventory
+ Net purchases
= Goods available for sale

Question 3

7.1 - Inventory Fundamentals
Sources of Inventories:

Calculate materials available for use for a manufacturer

Answer 3

Beginning inventory
+ Net purchases
= Materials available for use

Question 4

7.1 - Inventory Fundamentals
Sources of Inventories:

Calculate direct materials used in production for a manufacturer

Answer 4

Materials available for use
- Ending materials inventory
= Direct materials used in production

Question 5

7.1 - Inventory Fundamentals
Sources of Inventories:

Calculate total manufacturing costs for the period for a manufacturer

Answer 5

Direct Materials
+ Direct Labor
+ Overhead
= Total Manufacturing Costs

Question 6

7.1 - Inventory Fundamentals
Sources of Inventories:

Calculate the cost of goods manufactured for a manufacturer

Answer 6

Total Manufacturing Costs
+ Beginning WIP
- Ending WIP
= Cost of Goods Manufactured

or current manufacturing costs adjusted for the change in WIP

Question 7

7.1 - Inventory Fundamentals
Sources of Inventories:

Calculate goods available for sale for a manufacturer

Answer 7

Cost of goods manufactured
+ Beginning finished goods inventory
= Goods available for sale

Question 8

7.1 - Inventory Fundamentals
Sources of Inventories:

Calculate cost of goods sold for a manufacturer

Answer 8

Goods available for sale
- Ending finished goods inventory
= Cost of goods sold

or Cost of Goods Manufactured adjusted for the change in finished goods inventory

Question 9

7.2 Consignment Accounting
Overview:

What is a consignment sale?

Answer 9

an arrangement between the owner of goods and a sales agent