Every term, formula, and entry

0 of 20 terms in your words

Terms

C1 Specific identification: Costing method that tracks the actual cost of each specific unit sold and each unit remaining.
C1 First-in, first-out (FIFO): Costing method that assumes the earliest units purchased are the first ones sold.
C1 Last-in, first-out (LIFO): Costing method that assumes the most recently purchased units are the first ones sold.
C1 Weighted average: Costing method that assigns a single average cost per unit, recomputed after each purchase, to all units.
C1 Consistency concept: A company should use the same accounting methods period to period, or disclose a change and its effect.
C2 Goods in transit: Goods shipped but not yet received by the buyer; owned by whoever holds title under the shipping terms.
C2 Consigned goods: Goods owned by one party (the consignor) but held and offered for sale by another (the consignee).
C2 Consignor: The owner of consigned goods, who continues to own them until sold, even while another party holds them.
C2 Consignee: The party holding and selling consigned goods on behalf of the owner, without ever owning them.
C2 Goods damaged or obsolete: Goods still owned and countable in inventory, but reported at their net realizable value, not full cost.
C2 Net realizable value: Expected sales price minus the cost to make the sale — what damaged or obsolete goods are actually worth.
C3 Lower of cost or market (LCM): Inventory is reported at whichever is lower: its recorded cost, or its current market replacement cost.
C1 Cost of goods available for sale: Beginning inventory plus purchases during the period — the total that either sold or remains, however it is split.
C3 Conservatism constraint: When in doubt, choose the accounting response least likely to overstate assets or income.
A2 Inventory turnover: Cost of goods sold divided by average inventory — how many times inventory was sold and replaced in a period.
A2 Days' sales in inventory: Ending inventory divided by cost of goods sold, times 365 — roughly how many days it would take to sell off the inventory on hand.
C1 Periodic inventory system: A system that updates Merchandise inventory only at period end, by physically counting what remains.
C1 Perpetual inventory system: A system that updates Merchandise inventory continuously, with every purchase and every sale.
C1 Retail inventory method: Estimates ending inventory at cost from its retail value, using the ratio of cost to retail price. [book?] — check whether this edition places it in this chapter.
C1 Gross profit method: Estimates ending inventory from the historical gross profit ratio, without a physical count. [book?] — check whether this edition places it in this chapter.

Formulas

C1	Goods available for sale = Beginning inventory + Purchases	$910 + $1,590 + $2,300 + $1,190 = $5,990
C1	Cost of goods sold = Goods available − Ending inventory	FIFO: $5,990 − $1,420 = $4,570
P1	Weighted average unit cost (perpetual) = Cost on hand ÷ Units on hand	After Aug 3: $2,500 ÷ 25 = $100. After Aug 28: $3,990 ÷ 35 = $114
A2	Inventory turnover = Cost of goods sold ÷ Average inventory	$4,570 ÷ (($910 + $1,420) ÷ 2) = 3.9 times
A2	Days' sales in inventory = Ending inventory ÷ Cost of goods sold × 365	$1,420 ÷ $4,570 × 365 = 113.4 days

Every entry the chapter teaches

(fifo-aug3) Aug 3: buys 15 units at $106 on credit

	Merchandise inventory	1,590
	Accounts payable		1,590

(fifo-aug14-price) Aug 14: sells 20 units at $130 on credit — the price entry

	Accounts receivable	2,600
	Sales		2,600

(fifo-aug14-cost) Aug 14: the cost entry under FIFO

	Cost of goods sold	1,970
	Merchandise inventory		1,970

(fifo-aug17) Aug 17: buys 20 units at $115 on credit

	Merchandise inventory	2,300
	Accounts payable		2,300

(fifo-aug31-price) Aug 31: sells 23 units at $150 on credit — the price entry

	Accounts receivable	3,450
	Sales		3,450

(fifo-aug31-cost) Aug 31: the cost entry under FIFO

	Cost of goods sold	2,600
	Merchandise inventory		2,600

(lifo-aug14-cost) Aug 14: the cost entry under LIFO

	Cost of goods sold	2,045
	Merchandise inventory		2,045

(lifo-aug31-cost) Aug 31: the cost entry under LIFO

	Cost of goods sold	2,685
	Merchandise inventory		2,685

(wavg-aug14-cost) Aug 14: the cost entry under WAVG

	Cost of goods sold	2,000
	Merchandise inventory		2,000

(wavg-aug31-cost) Aug 31: the cost entry under WAVG

	Cost of goods sold	2,622
	Merchandise inventory		2,622

(9) Market value of 100 units falls from $20 cost to $17: write inventory down to market

	Cost of goods sold	300
	Merchandise inventory		300