Inventory

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					Chapter 7 Review
Recording and Evaluating
  Expenditure Process
       Activities
What is the difference between
Cost of Goods Sold and Loss on
          Inventory?
  Cost of Goods    Loss on Inventory
       Sold        Considered loss—
Incurred in an     no attempt to
attempt to         generate revenue
generate revenue   (usually not on
(Decreases         external financial
inventory)         statements)
 When can you recognize an
        expense?

• After cash is paid
• Before cash is paid
• Concurrent with cash paid
(Recognized when incurred)
 A company purchases $200 of
 inventory for resale. What is
 the entry using the perpetual
      inventory system?
Dr. Merchandise Inventory
  Cr. Cash or Accounts Pay.

HINT: Guess Merchandise Inventory
  for Perpetual System
A company purchases $200 of
inventory for resale. What is
 the entry using the periodic
      inventory system?

Dr. Purchases
 Cr. Cash or Accounts Pay.
Name four special journals.
•   Cash Receipts
•   Cash Disbursements
•   Purchases
•   Sales
   Using a periodic inventory
system, what account would be
 used when a company returns
inventory to a supplier because
     the item was broken?
Purchase Returns and
 Allowances
 Which account is used by a
company using the net price
method if it pays for inventory
purchases after the discount
    period has expired?

       Discounts Lost
  Know Payroll Calculations
• Payroll liabilities (Gross – Net
  Pay)
• Wage Expense (Gross Pay)
• Net Pay due to employees
  (Gross Pay – Liabilities)
• Payroll Tax Expense (FICA,
  FUTA, SUTA)
Know Inventory Calculations
• Inventory recorded at …
 – Net Price Method
 – Gross Price Method
Know Inventory Calculations
• Paying within discount
  using both methods.
• Paying after discount
  period has expired using
  both methods.
Know Inventory Calculations
• Calculate inventory
  purchases (work forwards
  and backwards)
(Beg. Inv. + Purchases = COGA
  COGA – COGS = End. Inv)
Bonus: A company had an ending balance
in its accounts payable account that was
$5,000 lower than its beginning balance.
Purchases of inventory on account during
the period were $500,000. What was the
amount of cash paid to suppliers during
the period?

5,000 + 500,000 – 0 = $505,000
A company’s balance sheet indicates
that its land account decreased by
$90,000 during the period. The
company’s income statement reveals a
“loss on sale of land,” of $10,000. How
should the company report the sale of
land on its statement of cash flows?


$80,000 cash inflow from investing
A company’s balance sheet indicates that
its bonds payable account had a zero
beginning balance and a $200,000
ending balance while its discount on
bonds payable account had a zero ending
balance and a $5,000 ending balance.
What should the company report on its
statement of cash flows?

$195,000 cash inflow from financing
  A company’s beginning retained earnings
 balance was $60,000 and its ending balance
 was $70,000. During the period the
 company earned income of $100,000. This
 same company has a dividends payable
 account that had a zero beginning balance
 and a $7,000 ending balance. What should
 the company report on its statement of
 cash flows?
60,000 + 100,000 – 70,000 = 90,000;
0 + 90,000 – 7,000 = 83,000 cash
outflow from financing
  How do you calculate earnings
          per share?

(Net income - Preferred dividends)
Weighted average common shares
outstanding
   How do you calculate diluted
      earnings per share?

(Net income - Preferred dividends)
Weighted average common and
common equivalent shares
outstanding
How do you calculate Return on
 Investment for the Division?

 Profit of the Division
 Assets of the Division
  How do you calculate ending
  inventory cost per unit using
       variable costing?
Includes costs that vary with
production (direct materials,
direct labor, and unit-related
overhead)
 How do you calculate ending
 inventory cost per unit using
     throughput costing?

Only the cost of direct
materials are used.
 What are the Different Types of
    Responsibility Centers?
Cost center—responsible for cost control
Revenue center—responsible for
revenue generation
Profit center—responsible for profit
generation
Investment center—responsible for
profits and using assets efficiently and
effectively
What do you use to calculate cost of
   goods manufactured using
       absorption costing?

All production costs (Direct
Materials, Direct Labor, and all
production overhead—unit-related,
batch-related, product-sustaining,
facility sustaining overhead)
What do you use to calculate cost of
goods manufactured using variable
            costing?

Only unit-variable costs (Direct
Material, Direct Labor, and Unit-
Related Overhead) are assigned
to cost of goods sold
  What are other comprehensive
income items, but not net income?

•Items that have not been realized and,
therefore, are not included in net income, but
which affect profitability comparisons. Shown
net-of-tax.
•Foreign currency translation adjustments,
pension liability adjustments, and unrealized
gains/losses on available-for-sale securities.
      Know How to Calculate the
             following:
•Net Sales
  •Sales – Sales Returns & Allowance – Sales Discounts
•Gross Margin
  •Net Sales – Cost of Goods Sold
•Income from Operations
  •Gross Margin – Operating Expenses
     Know How to Calculate the
            following:
•Income before income taxes
  •Income from Operations + Other Revenues
  and Gains – Other Expenses and Losses
•Net Income
  •Income before income taxes * (100 -% tax)
     Know How to Calculate the
            following:
•Income before income taxes
  •Income from Operations + Other Revenues
  and Gains – Other Expenses and Losses
•Net Income
  •Income before income taxes * (100 -% tax)

				
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posted:10/1/2012
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