基础会计学英文版lesson07-enMerchandise Inventories and Cost of Sales.ppt

* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * 18 18 18 18 * * * * * * LIFO-Example * This leaves 5 units remaining from the first purchase. Better matches current costs in cost of goods sold with revenues. Moving Weighted Average Method Under this method, the cost of all units are averaged together. * Average cost per unit Cost of goods available for sale Number of units available for sale = Moving Weighted Average-Example * Additional units are purchased @ $100/unit. This results in an average cost of $100/unit. (10 x $90) + (15 x $100) 25 units Moving Weighted Average-Example * These 20 units are sold at the average cost of $96/unit. Moving Weighted Average-Example * This leaves 5 units remaining at an average cost of $96/unit. Smoothes out purchase price changes. Financial Reporting Because prices change, the choice of an inventory method influences both income statement and the balance sheet. * Lower of Cost or Market Inventory must be reported at market value when market is lower than cost (conservatism principle). Market may be defined as: Net realizable value Current replacement cost May be applied in one of three ways: Separately to each item. To major categories of items. To the inventory as a whole. * Lower of Cost or Market A motor retailer has the following items in inventory: * Lower of Cost or Market Compute lower of cost or market for individual inventory items. * Lower of Cost or Market Compute lower of cost or market for the two groups of inventory items. * Lower of Cost or Market Compute lower of cost or market for the entire inventory. * Errors in Measuring Inventory * Retail Inventory Method Occasionally used for interim period reporting. Needed information includes: Beginning inventory at cost and retail. Net purchases at cost and retail. Net sales. * Retail Inventory Method * Step 3 Cost to retail ratio Ending inventory at retail Estimated ending inventory at cost = × Step 2 Goods available for sale a