Bài giảng Financial Accounting - Chapter 6: Inventory and Cost of Goods Sold

Inventory and Costof Goods SoldChapter 6 Learning ObjectivesTrace the flow of inventory costs from manufacturing companies to merchandising companiesUnderstand how cost of goods sold is reported in a multiple-step income statementDetermine the cost of goods sold and ending inventory using different inventory cost methodsExplain the financial statement effects and tax effects of inventory cost flow assumptionsLearning ObjectivesRecord inventory transactions using a perpetual inventory systemApply the lower-of-cost-or-market method for inventoriesAnalyze management of inventory using the inventory turnover ratio and gross profit ratioRecord inventory transactions using a periodic inventory systemDetermine the financial statement effects of inventory errorsPart AUnderstanding Inventory and Costof Goods SoldCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-4Learning Objective 1Trace the flow of inventory costs from manufacturing companies to merchandising companiesCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-5InventoryIncludes items a company intends for sale to customersAlso includes items that are not yet finished productsReported as a current assetCost of goods sold: Cost of the inventory that is sold during the periodManufacturing and Merchandising CompaniesInventory MerchandisecompanyManufacturingcompanyWholesalerRetailer Raw materialWork in ProgressFinished goodsIllustration 6.2—Types of Companies and Flow of Inventory CostsLearning Objective 2Understand how cost of goods sold is reported in a multiple-step income statementCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-9Illustration 6.4—Multiple-Step Income StatementLearning Objective 3Determine the cost of goods sold and ending inventory using different inventory cost methodsCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-11Inventory Cost MethodsSpecific identificationFirst-in, first-out (FIFO)Last-in, first-out (LIFO)Weighted-average costWeighted-Average CostUnder this method, we assume:Both cost of goods sold and ending inventory consist of a random mixture of all the goods available for saleEach unit of inventory has a cost equal to the weighted-average unit cost of all inventory itemsCalculated as:Cost of goods available for saleNumber of units available for saleIllustration 6.9—Comparison of the Three Inventory Cost Flow AssumptionsLearning Objective 4Explain the financial statement effects and tax effects of inventory cost flow assumptionsCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-15Choice of Inventory Reporting MethodsFIFO methodMatches physical flow for most companiesEnding inventory reflects today’s costsBalance-sheet approachLIFO methodCost of goods sold reflects today’s costsIncome-statement approachLIFO conformity rule: requires companies that use LIFO for tax reporting to also use LIFO for financial reportingReporting the LIFO DifferenceLIFO DifferenceCompanies that choose LIFO must report the difference if it used FIFO instead of LIFOExample—Impact of the LIFO Difference on Reported InventoryPart BRecording Inventory TransactionsCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-18Perpetual Inventory System and Periodic Inventory SystemPerpetual Inventory SystemMaintains a continual track of inventoryHelps a company better manage inventory levelsPeriodic Inventory SystemDoes not maintain a continual track of inventoryPeriodically adjusts for purchase and sale of inventoryReports inventory based on a physical countLearning Objective 5 Record inventory transactions using a perpetual inventory systemCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-20LIFO AdjustmentUsed to convert a company’s own inventory records maintained on a FIFO basis to LIFO basis for preparing financial statementsThe difference in reported inventory when using LIFO instead of FIFO is commonly referred to as the LIFO reserveAdditional Inventory TransactionsFreight chargesFreight-inFreight-outPurchase discountsPurchase returnsIllustration 6.15—Shipping TermsPart CLower-of-Cost-or-Market MethodCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-24Learning Objective 6Apply the lower-of-cost-or-market method for inventoriesCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-25Lower-of-Cost-or-Market MethodReports inventory in the balance sheet at the lower of cost or market valueReplacement costCost to replace an inventory item in its identical formLearning Objective 7Analyze management of inventory using the inventory turnover ratio and gross profit ratioCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-27Inventory Turnover RatioShows the number of times the firm sells its average inventory balance during a reporting periodAverage Days in InventoryIndicates the approximate number of days the average inventory is heldGross Profit RatioIndicator of the company’s successful management of inventoryMeasures the amount by which the sale price of inventory exceeds its cost per dollar of salesLearning Objective 8Record inventory transactions using a periodic inventory systemCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-31Periodic Inventory SystemDoes not continually modify inventory amountsPeriodically adjust for purchases and sales of inventoryAt the end of the reporting periodBased on a physical count of inventory on handLearning Objective 9Determine the financial statement effects of inventory errorsCopyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-33Illustration 6.26—Effects in the Current YearEnd of Chapter 6Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.6-35