Kế toán, kiểm toán - Accounting for inventories

Accounting for InventoriesInventory CostsAll expenditures incurredInventory CostsAll expenditures incurred to bring the item to itsInventory CostsAll expenditures incurred to bring the item to its existing condition and locationCosts includeInvoice costShippingCash discountsPurchases allowancesInventory Systems - PeriodicCompute inventory balance at end of each accounting periodCompute cost of goods sold at accounting period endInventory Systems - PerpetualCompute cost of goods sold at each saleCompute new inventory balance at each saleCost Flow AssumptionsOnly with specific identification do we attempt to match the actual movement of product through the business with the movement of costs through the accounting systemCost Flow AssumptionsWith other inventory cost methods, we make an assumption of the movement of costs through the accounting system.This "flow" of costs through the system need not match the movement of product through the business.Cost Flow AssumptionsFirst-In, First-OutCost Flow AssumptionsFirst-In, First-OutEarliest goods assumed to be first units soldCost Flow AssumptionsFirst-In, First-OutEarliest goods assumed to be first units soldInventory made up of latest goods acquiredCost Flow AssumptionsLast-In, First-OutCost Flow AssumptionsLast-In, First-OutNewest goods assumed to be first units soldCost Flow AssumptionsLast-In, First-OutNewest goods assumed to be first units soldInventory made up of earliest goods acquiredCost Flow AssumptionsAverage costCost Flow AssumptionsAverage costCost of items sold is the weighted average of costs incurredCost Flow AssumptionsAverage costCost of items sold is the weighted average of costs incurredInventory is the weighted average of costs incurredInventory Example DataJan. 1 Beg Inven. 200 $4.00 $ 800.00Apr. 10 Purchase 700 5.00 3,500.00Oct. 23 Purchase 400 6.00 2,400.00Available 1,300 $6,700.00Merchandise SalesMay 5 500Dec. 19 300Total 800First-In First-OutNewest layer $6.00First-In First-OutNewest layer 400 units @ $6.00 $2,400First-In First-OutNewest layer 400 units @ $6.00 $2,400Next newest layer $5.00First-In First-OutNewest layer 400 units @ $6.00 $2,400Next newest layer 100 units @ $5.00 500First-In First-OutNewest layer 400 units @ $6.00 $2,400Next newest layer 100 units @ $5.00 500Total cost $2,900First-In First-OutCost of Goods SoldBeginning Inventory $ 800First-In First-OutCost of Goods SoldBeginning Inventory $ 800Purchases 5,900Cost of goods available for sale $6,700First-In First-OutCost of Goods SoldBeginning Inventory $ 800Purchases 5,900Cost of goods available for sale $6,700Deduct: Ending Inventory 2,900Cost of goods sold $3,800First-In First-OutProof of cost of goods sold:Oldest cost layer 200 units @ $4.00 $ 800First-In First-OutProof of cost of goods sold:Oldest cost layer 200 units @ $4.00 $ 800Next oldest layer 600 units @ $5.00 3,000Total $3,800Last-In First-OutOldest layer $4.00 Last-In First-OutOldest layer 200 units @ $4.00 $ 800Last-In First-OutOldest layer 200 units @ $4.00 $ 800Next oldest layer $5.00 Last-In First-OutOldest layer 200 units @ $4.00 $ 800Next oldest layer 300 units @ $5.00 1,500Last-In First-OutOldest layer 200 units @ $4.00 $ 800Next oldest layer 300 units @ $5.00 1,500Total cost $2,300Last-In First-OutLIFOPeriodic InventoryCost of goods sold:Beginning inventory $ 800Last-In First-OutLIFOPeriodic InventoryCost of goods sold:Beginning inventory $ 800Purchase 5,900Cost of goods available $6,700Last-In First-OutLIFOPeriodic InventoryCost of goods sold:Beginning inventory $ 800Purchase 5,900Cost of goods available $6,700Deduct: Ending inventory 2,300Cost of goods sold $4,400Last-In First-OutLIFOPeriodic InventoryProof of Cost of Goods SoldLast-In First-OutLIFOPeriodic InventoryProof of Cost of Goods SoldNewest cost layer 400 units @ $6.00 $2,400Last-In First-OutLIFOPeriodic InventoryProof of Cost of Goods SoldNewest cost layer 400 units @ $6.00 $2,400Next newest layer 400 units @ $5.00 2,000Total cost $4,400Weighted AveragePeriodic InventoryWeighted average cost equalsCost of goods available for sale $6,700divided byTotal units available 1,300equalsWeighted average cost per unit $5.1538Weighted AveragePeriodic InventoryDecember 31 Inventory 500 units x $5.1538 = $2,577Weighted AveragePeriodic InventoryCost of goods sold:Weighted AveragePeriodic InventoryCost of goods sold:Beginning inventory $ 800Purchases 5,900Cost of goods available $6,700Weighted AveragePeriodic InventoryCost of goods sold:Beginning inventory $ 800Purchases 5,900Cost of goods available $6,700Deduct: Ending inventory 2,577Cost of goods sold $4,123Weighted AveragePeriodic InventoryProof of cost of goods sold 800 units x $5.1538 = $4,123Income Statement Comparison Periodic Inventory FIFO LIFO WASales $8,000 $8,000 $8,000CGS 3,800 4,400 4,123GM $4,200 $3,600 $3,877Op. expense 1,000 1,000 1,000Net income $3,200 $2,600 $2,877Last-In First-OutLIFO - Perpetual Inventory 200 x $4 $800 Last-In First-OutLIFO - Perpetual Inventory4/4 700 x $5 $3500 200 x $4 $800 700 x $5 3500 $4300Last-In First-OutLIFO - Perpetual Inventory4/4 700 x $5 $3500 200 x $4 $800 700 x $5 3500 $43005/5 500 x $5 $2500 200 x $4 $800 200 x $5 1000 $1800Last-In First-OutLIFO - Perpetual Inventory4/4 700 x $5 $3500 200 x $4 $800 700 x $5 3500 $43005/5 500 x $5 $2500 200 x $4 $800 200 x $5 1000 $180010/23 400 x $6 $2400 200 x $4 $800 200 x $5 1000 400 x $6 2400 $4200Last-In First-OutLIFO - Perpetual Inventory4/4 700 x $5 $3500 200 x $4 $800 700 x $5 3500 $43005/5 500 x $5 $2500 200 x $4 $800 200 x $5 1000 $180010/23 400 x $6 $2400 200 x $4 $800 200 x $5 1000 400 x $6 2400 $420012/19 300x $6 $1800 200 x $4 $800 200 x $5 1000 100 x $6 600 $2400Last-In First-OutLIFO - Perpetual Inventory4/4 700 x $5 $3500 200 x $4 $800 700 x $5 3500 $43005/5 500 x $5 $2500 200 x $4 $800 200 x $5 1000 $180010/23 400 x $6 $2400 200 x $4 $800 200 x $5 1000 400 x $6 2400 $420012/19 300x $6 $1800 200 x $4 $800 200 x $5 1000 100 x $6 600 $2400Cost of goods sold $4300Lower of Cost or MarketClass A Cost Mkt LCM Item 1 $100 $120 Item 2 80 70 Class B Item 6 $50 $65 Item 7 40 20 Lower of Cost or Market - By ItemClass A Cost Mkt LCM Item 1 $100 $120 $100Lower of Cost or Market - By ItemClass A Cost Mkt LCM Item 1 $100 $120 $100 Item 2 80 70 70Lower of Cost or Market - By ItemClass A Cost Mkt LCM Item 1 $100 $120 $100 Item 2 80 70 70Class B Item 6 $50 $65 50Lower of Cost or Market - By ItemClass A Cost Mkt LCM Item 1 $100 $120 $100 Item 2 80 70 70Class B Item 6 $50 $65 50 Item 7 40 20 20Total $240Lower of Cost or Market - By ClassClass A Cost Mkt LCM Item 1 $100 $120 Item 2 80 70 Total $180 $190 $180Lower of Cost or Market - By ClassClass A Cost Mkt LCM Item 1 $100 $120 Item 2 80 70 Total $180 $190 $180Class B Item 6 $50 $65 Item 7 40 20 Total $90 $85 85Total $265Lower of Cost or Market- By TotalClass A Cost Mkt LCM Item 1 $100 $120 Item 2 80 70Class B Item 6 50 40 Item 7 40 20Total $270 $275 $270Gross Margin MethodLogic of Income StatementNet Sales $70Cost of goods sold: Begin inv $ 5 Net purchases 50 Cost goods avail $55 End inv 10 45Gross margin $25Gross Margin MethodInventory EstimationCost of goods available: Begin inv $ 20,000 Net purchases 135,000 Cost of goods available $155,000Deduct cost of goods sold:Gross Margin MethodInventory EstimationCost of goods available $155,000Net sales $150,000Multiply by (1 - Gross margin rate) (1 - 0.30) x 0.70Est cost of goods sold 105,000Est ending inventory $ 50,000Gross Margin Method Proof of AnswerNet sales $150,000Cost of goods sold Begin inv $ 20,000 Net purchases 135,000 CGAS $155,000 End inv 50,000 Cost of goods sold 105,000Gross margin $ 45,000Inventory ErrorsAn error in the computation of inventory at the end of one periodInventory ErrorsAn error in the computation of inventory at the end of one period causes an error in assets and owner’s equity at the end of that periodInventory ErrorsAn error in the computation of inventory at the end of one period causes an error in assets and owner’s equity at the end of that periodand an error in income for two periods.Effect of Inventory ErrorsOverstatement of inventory at end of period 1Causes an overstatement of net income for period 1Effect of Inventory ErrorsOverstatement of inventory at end of period 1Causes an overstatement of net income for period 1and an overstatement of assets and owner's equity at period 1 endEffect of Inventory ErrorsOverstatement of inventory at end of period 1Causes an understatement of net income for period 2Effect of Inventory ErrorsOverstatement of inventory at end of period 1Causes an understatement of net income for period 2BUT assets and owner's equity at period 2 end will be correctEffect of Inventory ErrorsUnderstatement of inventory at end of period 1Causes an understatement of net income for period 1Effect of Inventory ErrorsUnderstatement of inventory at end of period 1Causes an understatement of net income for period 1and an understatement of assets and owner's equity at period 1 endEffect of Inventory ErrorsUnderstatement of inventory at end of period 1Causes an overstatement of net income for period 2Effect of Inventory ErrorsUnderstatement of inventory at end of period 1Causes an overstatement of net income for period 2BUT assets and owner's equity at period 2 end will be correct