中级财务会计-课件.ppt

,Inventories:Basic Valuation Methods&Special Valuation Methods,Chapter 5,Intermediate Accounting12th EditionKieso,Weygandt,and Warfield,Prepared by Coby Harmon,University of California,Santa Barbara,Describe how inventory accounts are classified.Explain the uses of perpetual and periodic inventory systems.Identify how inventory quantities are determined.Determine the cost of inventory.Compute ending inventory and cost of goods sold under specific identification,FIFO,average cost,and LIFO.Explain the conceptual issues regarding alternative inventory cost flow assumptions.Understand dollar-value LIFO.Explain additional LIFO issues.Understand inventory disclosures.,Learning Objectives,Understand the lower of cost or market method.Explain the conceptual issues regarding the lower of cost or market method.Understand purchase obligations and product financing arrangements.Explain the valuation of inventory above cost.Use the gross profit method.Understand the retail inventory method.Explain the conceptual issues regarding the retail inventory method.Understand the dollar-value retail method.Understand the effects of inventory errors on the financial statements.,Learning Objectives,Typically represent the largestcurrent asset of manufacturingand retail firms.,For many companies inventoriesare a significant portionof total assets as well.,Inventory methods and managementpractices can becomeprofit-enhancing tools.,Importance of Inventories,Merchandise inventory Goods acquired for resaleManufacturing inventory Raw materials Work-in-process Finished goods Manufacturing suppliesMiscellaneous inventory,Inventory Categories,Flow of Inventory Costs,Merchandising Company,Manufacturing Company,Merchandising Company,Flow of Inventory Costs,Manufacturing Company,Continued,Flow of Inventory Costs,Manufacturing Company,Continued,Flow of Inventory Costs,Manufacturing Company,Flow of Inventory Costs,General RuleAll goods owned by the company on the inventory date,regardless of their location.Goods in transit depend on the FOB terms.Goods on consignment.,Items Included in Inventory,Who Owns the Inventory?,Invoice priceFreight-inPurchase discountsOther costs to get the inventory ready for sale,Components of Inventory Cost,Under the gross price method,a company records the purchase at the gross price,and records the amount of the discount in the accounting system only if the discount is taken.,Under the net price method,a company records the purchase at its net price,and records the amount of the discount in the accounting system only if the discount is not taken.,Purchases Discounts,To record the purchase,Inventory(or Purchases)1,000Accounts Payable1,000,A company purchases$1,000 of goods under terms of 1/10,n/30.,To record payment within the discount period:,Accounts Payable1,000Purchases Discounts Taken10Cash990,To record payment after the discount period:,Accounts Payable1,000Cash1,000,Purchases Discounts-Gross Price Method,To record the purchase:,Inventory(or Purchases)990Accounts Payable990,A company purchases$1,000 of goods under terms of 1/10,n/30.,To record payment within the discount period:,Accounts Payable990Cash990,To record payment after the discount period:,Accounts Payable990Purchases Discounts Lost10Cash1,000,Purchases Discounts Lost are treated as a financing expense in the Other section of the income statement.,Purchases Discounts-Net Price Method,Net Price Method,Adjusting entry at the end of period if discount has expired and invoice is unpaid:,Purchases Discounts Lost10Accounts Payable10,A company purchases$1,000 of goods under terms of 1/10,n/30.,Purchases Discounts,PERIODIC METHODvs.PERPETUAL METHOD,Inventory Recording Methods,A company using a periodic system does not maintain a continuous record of the physical quantities on hand.,Alternative Inventory Systems,Beginning Inventory+Purchases(net)=Cost of Goods Available for Sale-Ending Inventory=Cost of Goods Sold,Calculating Cost of Goods Sold(COGS),Beginning inventory+Purchases(net)-Goods Sold=Ending Inventory,Perpetual Inventory System,Beginning inventory+Purchases(net)-Ending Inventory=Goods Sold,PeriodicInventory System,Comparison of Systems,Periodic versus Perpetual,At the end of the accounting period,calculate COGS by closing:Purchases,Purchases Discount,Purchase Returns and Allowances,Beginning Inventory,and Record Ending Inventory.COGS is closed to Income Summary.,Periodic System,Periodic System,Periodic System,Periodic System,Periodic System,Periodic System,Purchases discount and purchase returns and allowances are contra-purchases accounts,i.e.,they have a credit balance.Purchases can be recorded using the gross or net method.,Periodic System,The inventory account is continuously updated for:,Perpetual System,Returns of inventory are credited to the inventory account.Discounts on inventory purchases can be recorded using the gross or net method.,Perpetual System,Cable TV,Inc.used the gross method to record a purchase on March 23 for$50,000 with terms of 2/10,n/30.Payment was made on April 1.Which of the following is included on the April 1 entry?a.Credit Purchases Discount$1,000b.Debit Purchases Discount$1,000c.Credit Inventory$1,000d.Debit Inventory$1,000,Perpetual System,Cable TV,Inc.used the gross method to record a purchase on March 23 for$50,000 with terms of 2/10,n/30.Payment was made on April 1.Which of the following is included on the April 1 entry?a.Credit Purchases Discount$1,000b.Debit Purchases Discount$1,000c.Credit Inventory$1,000d.Debit Inventory$1,000,Perpetual System,Perpetual System,Cable TV,Inc.used the net method to record a purchase on March 23 for$50,000 with terms of 2/10,n/30.Payment was made on April 5.Which of the following is included on the April 5 entry?a.Credit Purchases Discount$1,000b.Debit Purchases Discount$1,000c.Credit Purchases Discounts Forfeited$1,000d.Debit Purchases Discounts Forfeited$1,000,Periodic System,Cable TV,Inc.used the net method to record a purchase on March 23 for$50,000 with terms of 2/10,n/30.Payment was made on April 5.Which of the following is included on the April 5 entry?a.Credit Purchases Discount$1,000b.Debit Purchases Discount$1,000c.Credit Purchases Discounts Forfeited$1,000d.Debit Purchases Discounts Forfeited$1,000,Periodic System,Represents a finance charge and is included with misc.expenses,Periodic System,Cost of Goods Sold is closed to Income Summary during the usual closing entries at the end of the period.,Perpetual System,Cost basis Departures from cost Lower of cost or market(LCM)Net realizable value Replacement cost Current cost Selling price,Inventory Values-Unit Cost,Specific cost identificationAverage costFirst-in,first-out(FIFO)Last-in,first-out(LIFO),Inventory Cost Flow Methods,Specific cost of each inventory item must be known.Opportunity to manipulate income by selection of items at time of sale.,Specific Cost Identification,100units$10 per unit,Apr.1Apr.10Apr.20,80units$11 per unit,70units$12 per unit,On April 27,sold 90 units from the beginning inventory,50 units from the April 10 purchase.,Specific Identification,100units$10 per unit,Apr.1Apr.10Apr.20,80units$11 per unit,70units$12 per unit,10units$10 per unit,30units$11 per unit,70units$12 per unit,Ending inventory.,Cost of Goods Sold.,Specific Identification,100units$10 per unit,Apr.1Apr.10Apr.20,30units$11 per unit,Apr.20,Apr.1,Apr.10,70units$12 per unit,10units$10 per unit,80units$11 per unit,70units$12 per unit,Ending inventory.,Goods available for sale.,Specific Identification,The periodic inventory system uses the weighted-average unit cost method.The perpetual inventory system uses the moving-average unit cost method.,Average Cost Method,Weighted-average cost(WAC)per unit Beginning inventory cost+Current purchase cost Beginning inventory units+Current purchase units Ending InventoryEnding Inv.=Units in Ending Inv.x WAC per UnitCost of Goods SoldCOGS=Units Sold x WAC per Unit,Weighted-AveragePeriodic Method,The following schedule shows the mouse pad inventory for Computers,Inc.for September.The physical inventory count shows 800 mouse pads in ending inventory.Use the weighted-average periodic method to determine:(1)Ending inventory cost.(2)Cost of goods sold.,Weighted-AveragePeriodic Method,Weighted-AveragePeriodic Method,GAS 1,550-EI(800)COGS 750,Weighted-AveragePeriodic Method,$8,370 1,550=$5.40 weighted-average,Weighted-AveragePeriodic Method,$8,370 1,550=$5.40 weighted-average,Weighted-AveragePeriodic Method,The following schedule shows the mouse pad inventory for Computers,Inc.for September.The physical inventory count shows 800 mouse pads in ending inventory.Use the moving-average periodic method to determine:(1)Ending inventory cost.(2)Cost of goods sold.,Moving-AveragePerpetual Example,A new average unit cost must be calculated after each purchase.We will update Computer,Inc.s inventory after each purchase and sale.,Moving-AveragePerpetual Example,Moving-AveragePerpetual Example,The 750 units were sold as follows:9/13009/102009/30250UNITS SOLD 750,Moving-AveragePerpetual Example,Moving-AveragePerpetual Example,Moving-AveragePerpetual Example,$4,205.00 800=$5.25625/unit,Moving-AveragePerpetual Example,Moving-AveragePerpetual Example,$3,993.75 750=$5.325,Moving-AveragePerpetual Example,Moving-AveragePerpetual Example,Hey,we need a little more room!,Moving-AveragePerpetual Example,Thats better.,Moving-AveragePerpetual Example,Moving-AveragePerpetual Example,Ending inventory is$4,376.19.Lets summarizecost of goods sold during September.,Moving-AveragePerpetual Example,Cost of ending inventory$4,376.19Cost of goods sold 3,993.81Goods available for sale$8,370.00,Moving-AveragePerpetual Example,Objective and consistent.Match average,rather than latest costs,with current sales revenues.,Average Cost Evaluation,The cost of the oldest inventory items are charged to COGS when goods are sold.The cost of the newest inventory items remain in ending inventory.,First-In,First-Out,Periodic ending inventory cost equals perpetual ending inventory cost.Periodic COGS equals perpetual COGS.,First-In,First-Out,AdvantagesEasy to apply.Inventory value approximates current cost.Flow of costs tends to be consistent with usual physical flow of goods.Systematic and objective.Not subject to manipulation.,Evaluation of FIFO,AdvantagesEasy to apply.Inventory value approximates current cost.Flow of costs tends to be consistent with usual physical flow of goods.Systematic and objective.Not subject to manipulation.,DisadvantagesDoes not match current cost of goods sold with current revenues.Inventory(or phantom)profits.In periods of rising prices,pay higher income taxes.,Evaluation of FIFO,Which of the following statements is true concerning the use of the FIFO inventory costing method?a.Ending inventory includes costs from the most recent purchases.b.COGS includes costs from the oldest purchases.c.FIFO can be used even if the actual flow of the inventory is not on a FIFO basis.d.All of the above statements are true.,FIFO-Example,Which of the following statements is true concerning the use of the FIFO inventory costing method?a.Ending inventory includes costs from the most recent purchases.b.COGS includes costs from the oldest purchases.c.FIFO can be used even if the actual flow of the inventory is not on a FIFO basis.d.All of the above statements are true.,FIFO-Example,The following schedule shows the mouse pad inventory for Computers,Inc.for September.The physical inventory count shows 800 mouse pads in ending inventory.Use the FIFO method to determine:(1)Ending inventory cost(2)Cost of goods sold,FIFO-Example,FIFO-Example,Remember:FIFO ending inventory is calculated using the cost of the newest purchases.Start with 9/29 and then add other purchases until you reach the number of units in ending inventory.,FIFO-Example,FIFO-Example,FIFO-Example,FIFO-Example,FIFO-Example,FIFO-Example,FIFO-Example,FIFO-Example,Any questions before we run into LIFO?,Last-In,First-Out,The cost of the newest inventory items are charged to COGS when goods are sold.The cost of the oldest inventory items remain in ending inventory.The actual physical flow of inventory items may differ from the LIFO cost flow assumptions.,Last-In,First-Out Unit Cost Approach,Periodic ending inventory cost may be different from perpetual ending inventory cost.Periodic COGS may be different from perpetual COGS.,Last-In,First-Out Results,AdvantagesIn periods of rising prices,pay less taxes.Matches latest inventory costs with current revenues.,DisadvantagesLIFO conformity rule for tax and book purposes.Cost of record keeping higher.Inventory valuation is at older costs.,Evaluation of LIFO,The following schedule shows the mouse pad inventory for Computers,Inc.for September.The physical inventory count shows 800 mouse pads in ending inventory.Use the LIFO periodic method to determine:(1)Ending inventory cost.(2)Cost of goods sold.,LIFO Periodic-Example,LIFO Periodic-Example,Remember:LIFO ending inventory is calculated using the cost of the oldest purchases.Start with beginning inventory and then add other purchases until you reach the number of units in ending inventory.,LIFO Periodic-Example,LIFO Periodic-Example,LIFO Periodic-Example,LIFO Periodic-Example,LIFO Periodic-Example,LIFO Periodic-Example,In our new example,Computers,Inc.has 1,200 units in inventory on November 30.The company uses the LIFO perpetual method to determine:(1)Ending inventory cost.(2)Cost of goods sold.,LIFO Perpetual-Example,To calculate the LIFO cost for ending inventory and COGS under the perpetual method,we must know when each unit was sold.,LAST-IN,FIRST-OUT,On November 3rd,300units were purchased at$5.30 per unit.We needto update the inventory.,LIFO Perpetual-Example,LIFO Perpetual-Example,On November 5th,100units were sold.We needto update the inventory.,LIFO Perpetual-Example,LIFO Perpetual-Example,On November 10th,150units were purchased at$5.60 per unit.We needto update the inventory.,LIFO Perpetual-Example,LIFO Perpetual-Example,On November 14th,200units were purchased at$5.80 per unit.We needto update the inventory.,LIFO Perpetual-Example,LIFO Perpetual-Example,On November 17th,400units were sold.We needto update the inventory.,LIFO Perpetual-Example,LIFO Perpetual-Example,On November 23rd,100units were sold.We needto update the inventory.,LIFO Perpetual-Example,LIFO Perpetual-Example,On November 30th,150units were purchased at$5.90 per unit.We needto update the inventory.,LIFO Perpetual-Example,LIFO Perpetual-Example,LIFOMatches high(newer)costs with current(higher)sales.Values inventory on low(older)cost basis.Results in lower taxable income.,FIFOMatches low(older)costs with current(higher)sales.Values inventory approximating higher current costs.Results in higher taxable income.,In Periods of Rising Prices.,Cost of Goods Cost of Available Goods Ending for Sale Sold Inventory,Cost Flow Assumption and Method,FIFO,periodic$2,720$1,440$1,280FIFO,perpetual2,7201,4401,280Weighted average2,7201,5231,197M