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Goods are included in the buyer's inventory when shipped.
what is FOB shipping point
If ending inventory is UNDERSTATED...
Assets and Equity are understated
Costs flow in the order incurred
FIFO
Accounts for inventory at the END of an accounting period
Inventory Costing under a Periodic system
Days' Sales Inventory Formula:
(Ending Inventory/COGS) * 365
FOB destination
If ending inventory is OVERSTATED...
Costs flow at an average of costs available
Weighted Average
Accounts for inventory CONTINUOUSLY throughout the accounting period
= Merchandise available for sale
Beginning Inventory + Net Purchases
Net realizable value formula:
Sales price - selling cost
Journal entry for Inventory Flows
DR: COGS
Cr: Merchandise Inventory
Costs flow at the date incurred
Specific Identification
If you were to account for every inventory cost as soon as it has been complete, which Inventory costing method would you be using?
Perpetual
Inventory costing affects which of the main accounting statements
Balance Sheet and Income Statement
Inventory cost formula:
Invoice cost - discounts + other costs
Inventory must be reported at MARKET VALUE when...
Market is lower than cost
Costs Flow in the reversed order incurred
LIFO
Perpetual: continuously
Periodic: end of accounting period
What are the Inventory estimation methods?
Retail Inventory and Gross Profit
Name all 4 Inventory Costing methods
FIFO, LIFO, Weighted Average, and Specific Identification
Inventory Turnover Formula:
Most common form of inventory costing method amongst businesses.
FIFO
Bike World accounts for inventory at year-end after all transactions have been journalized. Which Inventory costing system is this?
Periodic