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1、INVENTORIESANDTHECOSTOFGOODSSOLDChapter8FocuspointsCostflowassumptionUnderperpetualandperiodicinventorysystem,thedifferenceamongspecificidentification,LIFO,FIFO,andaveragemethod.Estimationmethodsofinventoryandcostofgoodssold.InventoryturnoverInventoryGood
2、sowned andheldforsale tocustomersCurrentassetInventoryDefinedINCOMESTATEMENTRevenueCostofgoodssoldGrossprofitExpensesNetincomeAspurchasecost(ormanufacturingcosts)areincurredasgoodsaresoldBALANCESHEETCurrentassets:Inventory$$$TheFlowofInventoryCostsInaperp
3、etualinventorysystem,inventoryentriesparalleltheflowofcosts.TheFlowofInventoryCostsWhenidenticalunitsofinventoryhavedifferentunitcosts,aquestionnaturallyarisesastowhichofthesecostsshouldbeusedinrecordingasaleofinventory.WhichUnitDidWeSell?Aseparatesubsidi
4、aryaccountismaintainedforeachitemininventory.HowcanwedeterminetheunitcostfortheSept.10sale?InventorySubsidiaryLedgerSpecificidentificationLIFOAveragecostFIFOWeuseoneoftheseinventoryvaluationmethodstodeterminecostofinventorysold.InventoryCostFlowsTheBikeCo
5、mpany(TBC)InformationfortheFollowingInventoryExamplesSpecificIdentificationWhenaunit issold,thespecificcostoftheunitsoldisaddedtocostofgoodssold.OnAugust14,TBCsold20bikesfor$130each.Ninebikesoriginallycost$91and11bikesoriginallycost$106.ContinueSpecificId
6、entificationTheCostofGoodsSoldfortheAugust14saleis$1,985,leaving$515and5unitsininventory.ContinueLet’slookattheentriesfortheAug.14sale.SpecificIdentificationContinueRetailCostAsimilarentryis madeaftereachsale.SpecificIdentificationAdditionalpurchaseswerem
7、adeonAugust17and28.CostsassociatedwithsalesonAugust31wereasfollows:1@$91,3@$106,15@$115,&4@$119.ContinueSpecificIdentificationCostofGoodsSoldforAugust31=$2,610BalanceSheetInventory=$1,395IncomeStatementCOGS=$4,595SpecificIdentificationSincespecificidentif
8、icationissoeasy,can’tweuseitallthetime?Notreally.Specificidentificationishardtousewhenwesellalotofinventorythathaslotsofdifferentcosts.CostofGoodsAvailableforSaleUnitsonhandonthedateofsale÷Average-CostMethodWhenauni
