2D Inventory

Front 1

setup for COGS

Back 1

Beg Inv

+ addtl purchases

+ freight-in

=COGA4S

- ending inv

=COGS

Front 2

describe a Perpetual Inventory System

Back 2

-NO purchase account; inventory transactions run through inventory account

-costly

Front 3

describe a Periodic Inventory System

Back 3

-inventory transactions go through purchase account

-have to do inventory count at end of period

Front 4

what is the diffence in ending inventory between a Perpetual and Periodic system of inventory?

Back 4

the same ending inventory for both

Front 5

Perpetual System: record purchase

Back 5

Inventory XX

Accounts Pay XX

Front 6

Perpetual System: record sale

Back 6

Accts Rec XX

Sales XX

COGS XX

Inventory XX

Front 7

Periodic System: record purchase

Back 7

Purchases XX

Accts Payable XX

Front 8

Periodic System: record sale

Back 8

Accts Rec XX

Sales XX

Front 9

Periodic System: period-end closing entry

Back 9

Ending Inv XX

COGS XX (plug amt)

Begin Inv XX

Purchases XX

Front 10

Lower-of-Cost-or-Market

Back 10

choose middle of:

Replacement Cost (given)

NRV (selling $ - disposal $)

Floor (NRV - normal profit margin)

compare that amount to Cost

Front 11

how does IFRS LCM method work?

Back 11

inventory is reported at the lower of Cost or NRV

-can record recovery of write-downs (NOT in GAAP)

Front 12

Record Write-Down of Inventory

Back 12

Loss XX

Inventory XX

Front 13

IFRS: Record recovery of Write-Down

Back 13

Inventory XX

Income XX

Front 14

describe the Gross Profit method

Back 14

used to estimate ending inventory without taking a count

-used in interim reporting

-used in determining damage to inventory

Front 15

how does GP% relate to COGS%?

Back 15

GP% + COGS% = 100%

Front 16

how do you convert Markup on Cost to work for the GP method?

Back 16

(Markup on Cost%) / (100 + Markup)

Front 17

describe the Retail Method

Back 17

used to estimate ending inventory without taking a count

a.k.a. Conventional Retail Method

a.k.a. Avg LCM Retail Method

Front 18

Retail Method: calculate Ending Inventory at Cost

Back 18

1. calc Ending Inv @ Retail: beg inv + purch + net markups - sales - net shrinkage

2. calc Cost-to-Retail%: COGS@cost / Goods Avail@retail

3. calc End Inv@cost: End Inv@retail * Cost to Retail %

Front 19

more info for calculating under Retail Method

Back 19

-both cost and retail amounts include Purchase Returns

-retail amount includes Sales Returns and Markups

-cost amount includes Freight-In

Front 20

describe Dollar Value LIFO

Back 20

used when there are large amounts of inventory so it can be categorized into cost pools

-beneficial in periods of rising prices (lower tax liability)

-NOT allowed in IFRS

-layer will decrease every year

Front 21

Dollar Value LIFO: calculate Price Index

Back 21

End Inv @ Current Price / End Inv @ BY Price

Front 22

effect of Overstated Ending Inventory

Back 22

COGS: understatement

Income: overstatement

Retained Earning: overstatement

Front 23

effect of Overstated Purchases

Back 23

COGS: overstatement

Income: understatement

Front 24

effect of Overstated Beginning Inventory

Back 24

COGS: overstatement

Income: understatement

Retained Earnings: overstatement