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Principle of accountin 21 edition
Typology: Thesis
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st Edition Warren Reeve Fess PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University © Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc.
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Receiving report Purchase order Invoice AGREE AGREE AGREE AGREE AGREE AGREE JOURNAL Description Nov. 9 Post. Ref. Date Inventory 1 222 00 Accounts Payable--XYZ Co. 1 222 00 Purchased merchandise on account.
LIABILITIES OWNER’S EQUITY REVENUES ASSETS COSTS & EXPENSES Effect of Inventory Errors on Effect of Inventory Errors on Financial Statements Financial Statements Effect of Inventory Errors on Effect of Inventory Errors on Financial Statements Financial Statements
If merchandise inventory is....... Cost of merchandise sold is...... Gross profit and net income are... Ending owner’s equity is......... If merchandise inventory is....... Cost of merchandise sold is...... Gross profit and net income are... Ending owner’s equity is......... overstated understated overstated overstated Net Income
Purchased goods Purchased goods Sold goods Sold goods Inventory Cost Flow Assumptions Inventory Cost Flow Assumptions Inventory Cost Flow AssumptionsInventory Cost Flow Assumptions
Sold goods Sold goods Inventory Cost Flow Assumptions Inventory Cost Flow Assumptions Inventory Cost Flow AssumptionsInventory Cost Flow Assumptions
Inventory Costing MethodsInventory Costing Methods Inventory Costing MethodsInventory Costing Methods 40% 30% 20% 10% 0% 43% 34% 19% 4% Fifo Lifo Average Other
Perpetual Inventory CostsPerpetual Inventory Costs Perpetual Inventory CostsPerpetual Inventory Costs
Item 127B Units Cost Price Jan. 1 Inventory 10 $ 4 Sale 7 $ 10 Purchase 8 21 22 Sale 4 31 28 Sale 2 32 30 Purchase 10 22 Item 127B Units Cost Price Jan. 1 Inventory 10 $ 4 Sale 7 $ 10 Purchase 8 21 22 Sale 4 31 28 Sale 2 32 30 Purchase 10 22
Item 127B FIFO Perpetual Inventory Account FIFO Perpetual Inventory Account Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan. 1 10 20 200 The firm begins the year with 10 The firm begins the year with 10 units of Item 127B on hand at a units of Item 127B on hand at a total cost of $200. total cost of $200.
Item 127B Units Cost Price Jan. 1 Inventory 10 $ 4 Sale 7 $ 10 Purchase 8 21 22 Sale 4 31 28 Sale 2 32 30 Purchase 10 22 Item 127B Units Cost Price Jan. 1 Inventory 10 $ 4 Sale 7 $ 10 Purchase 8 21 22 Sale 4 31 28 Sale 2 32 30 Purchase 10 22 FIFO Perpetual Inventory Account FIFO Perpetual Inventory Account On January 4, 7 units of Item On January 4, 7 units of Item 127B are sold at $30 each. 127B are sold at $30 each. On January 4, 7 units of Item On January 4, 7 units of Item 127B are sold at $30 each. 127B are sold at $30 each.
Item 127B Units Cost Price Jan. 1 Inventory 10 $ 4 Sale 7 $ 10 Purchase 8 21 22 Sale 4 31 28 Sale 2 32 30 Purchase 10 22 Item 127B Units Cost Price Jan. 1 Inventory 10 $ 4 Sale 7 $ 10 Purchase 8 21 22 Sale 4 31 28 Sale 2 32 30 Purchase 10 22 FIFO Perpetual Inventory Account FIFO Perpetual Inventory Account On January 10, the firm purchased On January 10, the firm purchased eight units at $21 each. eight units at $21 each. On January 10, the firm purchased On January 10, the firm purchased eight units at $21 each. eight units at $21 each.
Item 127B FIFO Perpetual Inventory Account FIFO Perpetual Inventory Account Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Jan. 1 10 20 200 4 7 20 140 3 20 60 10 8 21 168 3 20 60 8 21 168 On January 10, the firm On January 10, the firm purchased eight units at $21 each. purchased eight units at $21 each. On January 10, the firm On January 10, the firm purchased eight units at $21 each. purchased eight units at $21 each. Because the purchase price of $21 is different than the cost of the previous 3 units on hand, the inventory balance of 11 units is accounted for separately.
