Operating cycle∶ cost of goods sold and inventory.pptVIP

10 Operating cycle: cost of goods sold and inventory What is inventory? Merchandise, finished goods, low-value and perishable articles. Periodic accounting system and perpetual inventory system. The four main costing methods: The specific identification method 个别计价法; The first-in first-out method 先进先出法(FIFO); The last-in first-out method 后进先出法(LIFO); The weighted average cost method 加权平均法; The lower-of-cost-or market rule; 成本与市价孰低原则 How to calculate the cost of ending inventory The gross profit method; 毛利法 The retail method.零售价格法 costs to be included in inventory What is inventory? Asset items held for sale in the ordinary course of business or goods that will be used or consumed in the production of goods to be sold. For example, merchandise, finished goods, semi-finished goods, goods in process, raw materials, fuels, low-value and perishable articles. Merchandising firm: two kinds of merchandising firms Manufacturing firm: three types of inventory and three categories of cost * How to distinguish the cost of goods sold from selling, general and administrative expense? The costs incurred inside the factory are assigned to the cost of inventory, and costs incurred outside the factory are classified as selling, general and administrative expense. What are the items involved in the cost of inventory? The cost consists of the invoice price, transportation-in, insurance while in transit and other relative expenses. * Who owns the inventory? What is the “legal title” rule? If merchandising firm has legal title to the inventory that means the firm have purchased the inventory. Similarly, the inventory is considered to be sold when legal title passes to the customer. In which cases the legal title rule is difficult to apply? Goods in transit and goods on consignment. * * FOB (Free-on-Board): 离岸价格 Specifies where ownership transfers. Shipping Point: when delivered to carrier. Destination: when delivered from carrier to recipient. Consignment: Provide product to m