经典涉外会计.pptVIP

* Accounting for inventory requires several decisions. First, a costing method must be selected. We will review specific identification; first-in, first-out; last-in, first-out; and weighted average. Second, we must select either a perpetual or periodic inventory system. We will focus our attention on a perpetual inventory system. * We must make assumptions about the inventory cost flow. First-in, first-out assumes costs flow in the order incurred. Last-in, first-out assumes costs flow in the reverse order incurred. Weighted average assumes costs flow at an average of the costs available. Now, let’s see how these methods work in an example. * Take a minute and review this chart. We will use this data throughout our inventory examples so we can compare our results at the end. The inventory information is provided by Trekking, a sporting goods retailer. Data for the month of August includes: 1) beginning inventory; 2) purchases; and 3) sales. * Part I First, let’s look at the specific identification method. In this method, we know the specific cost of each unit that is sold. It is most commonly used in businesses that have low sales volume of high dollar items, like car dealerships, exclusive jewelry stores, and custom builders. On August 14th, Trekking sold 8 bikes that cost $91 each and 12 bikes that cost $106. The total cost of goods sold on this date is $2,000. Part II On August 31st Trekking sold 23 bikes with the cost per unit shown on your screen. The total cost of good sold on this date is $2,582. Let’s look at inventory at the end of August. Using the specific identification method, On August 31st, there are 12 units in inventory at $1,408 (5 units at $115 each plus 7 units at $119 each). Total cost of goods sold for the month is equal to $4,582 ($2,000 from the sale of August 14th plus $2,582 from the sale of August 28th). Trekking would report Cost of Goods Sold on their August income statement of $4,582, and report Inventory on their balan