Inventory Account
When we sell the asset, we will record an expense called _______.
Cost of Goods Sold
What does LIFO Assume?
Most recent goods purchased are the first goods sold.
What does FIFO assume?
First goods purchased, are first goods sold
What is the definition of Weighted Average?
Average cost of items is used to calculate cost of
goods sold
What is the formula for Inventory Turnover?
Cost of Goods Sold / Average Inventory
Every sale of inventory will involve what two events?
1.
2.
1. Record the sale
2. Record the cost of the sale
Compute the gross margin for LIFO:
Beginning inventory 85 units @ $21
Units purchased 114 units @ $38
Ending inventory consisted of 24 units. Sold 175 units at $65 each. All purchases and sales were made with cash. Operating expenses amounted to $2,500.
Sales: 175 @ 65 = $11,375
COGS = PI (114 units @ $38) + BI (61 units @$21)
GM = 11,375 - 5613 = $5,762
Compute the gross margin for FIFO:
Beginning inventory 85 units @ $21
Units purchased 114 units @ $38
Ending inventory consisted of 24 units. Sold 175 units at $65 each. All purchases and sales were made with cash. Operating expenses amounted to $2,500.
Sales: 175 @ 65 = $11,375
Cost of Goods Sold: (BI = 85 @ 21 = 1,785) + (PI = 90 @ 38 = 3,420) = $5,205
Gross Margin = 6,170
What is the formula for Weighted Average Cost per Unit?
Cost of Goods Available for Sale /
Units on hand on the date of sale
What is the formula of Average Days to Sell Inventory
Average Days to Sell Inventory = 365/ Inventory Turnover
What is the Inventory Account formula?
Beginning balance
+ inventory purchased
Cost of goods available for sale
- Cost of Goods Sold
Ending balance
Given, what is the NI when OE are 2,500?:
Sales: 175 @ 65 = $11,375
COGS = PI (114 units @ $38) + BI (61 units @$21)
GM = 11,375 - 5613 = $5,762
NI = Gross Margin - OE = $3,262
Based on the following information, what is net income w/ $2,500 total operating expenses?:
Sales: 175 @ 65 = $11,375
Cost of Goods Sold: (BI = 85 @ $21 = 1,785) + (PI = 90 @ $38 = 3,420) = $5,205
Gross Margin = $6,170
Net Income = Sales - COGS = GM - OE = NI
$11,375 - $5,205 = $6170 - GM
6,170 - 2,500 = 3,670
Compute the gross margin for weighted average:
Beginning inventory 85 units @ $21
Units purchased 114 units @ $38
Ending inventory consisted of 24 units. Sold 175 units at $65 each. All purchases and sales were made with cash. Operating expenses amounted to $2,500.
Sales: 175 @ 65 = $11,375
(BI= 85@$21= $1,785) & (UP= 114@$38= $4,332)
TI = $6117 for 199 units (85+114)
WACPU = $6117 / 199 = 30.74
COGS = 175 x 30.74 = 5,379.27 & GM = $5995.73
Which Inventory Turnover Ratio is better?
3.9. or 6.7
6.7, more times the inventory turns over is more healthy for the business
Determine the amount of the difference between book balance and the actual amount of inventory.
- Paid $25,000 cash to purchase inventory.
- Sold inventory costing $15,500 for $30,000 cash.
- Physically counted inventory showing $9,000
Inventory Account:
Beginning+ inventory bought - inventory sold = BB
BB - actual count = difference in book and actual
Thus answer is $500
Compute the ending inventory for LIFO:
Beginning inventory 85 units @ $21
Units purchased 114 units @ $38
Ending inventory consisted of 24 units. Sold 175 units at $65 each. All purchases and sales were made with cash. Operating expenses amounted to $2,500.
24 @ $21 = $504
Compute the ending inventory for FIFO:
Beginning inventory 85 units @ $21
Units purchased 114 units @ $38
Ending inventory consisted of 24 units. Sold 175 units at $65 each. All purchases and sales were made with cash. Operating expenses amounted to $2,500.
24 @ $38 = $912
Compute the net income for weighted average:
Beginning inventory 85 units @ $21 & Units purchased 114 units @ $38 & GM = $5995.73
Ending inventory consisted of 24 units. Sold 175 units at $65 each. All purchases and sales were made with cash. Operating expenses amounted to $2,500.
Net Income = Sales - COGS = GM - OE = NI
$11,375 - $5,379.27= $5995.73 - $2,500 =
$3,495.73
Which Average days to collect is better?
64, or. 43
43
What would the following event look like on the HM?
A. Sold inventory costing $5,060 for $7,050 cash.
A1. Cash +7,050 & RE + 7,050 & Rev+NI +7,050 & Cash flow +7,050 OA
A2. Inventory -5,060 & RE -5,060 & Exp+NI -5,060
Compute the ending inventory for WA:
Beginning inventory 85 units @ $21
Units purchased 114 units @ $38
Ending inventory consisted of 24 units. Sold 175 units at $65 each. All purchases and sales were made with cash. Operating expenses amounted to $2,500.
24 units × WACPU ($30.74) = $737.76