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Chapter 6
Inventories
Merchandise inventory: includes all goods that a company owns and holds for
sale, regardless of where the goods are located when
inventory is counted.
Inventory systems
Perpetual Periodic
Inventory Inventory
System System
Note that :
4- Unlike, perpetual inventory system which computes the cost of goods sold
and ending inventory balance after each transaction.
2- FOB destination legal title to the goods remains with the seller
until the goods reach the buyer.
Multiple choice :
Note that :
Note that : to compute the ending inventory under any of these methods we
must use inventory equation in merchandising companies .
Note that :
The sum of Beg. Inv . and cost of goods purchased equals the cost
of goods available of sale " inventoriable costs "
Beg Inv + cost of goods purchased = ending inventory + cost of goods sold
Example :
Note that :
Weight average cost per unit = cost of goods available for sale
Conclusion :
The highest gross profit and net income is under FIFO method.
The lowest gross profit and net income is under LIFO method.
Example :
* solve *
Cost of goods sold = cost of good available for sale – ending inventory
In this example the cost of goods available for sale would be:
Q P C
Beg. Inventory 200 4 $ 800
Under periodic inventory system, the cost of goods sold under each cost
flow method is a follow:
A) FIFO method
Ending inventory :
B) LIFO method
Ending inventory :
Weighted average cost per unit = Cost of goods available for sale
Then , cost of goods sold = cost of goods available for sale – ending
inventory