Inventory Flashcards
FOB Destination - when does ownership transfer?
Items remain in seller’s inventory until it reaches the buyer
FOB Shipping - when does ownership transfer?
Items transfer to buyer on the loading dock
What costs are Non-Inventoriable?
Sales Commission
Interest on Liabilities to Vendors
Shipping Expense to Customer
When are discounts recorded under the gross method?
Discounts are recorded only when used
When are discounts recorded under the net method?
Discounts are recorded whether used or not. Unused discounts are allocated to financing expense
What costs are inventoriable?
Purchases - net of discount
Freight - FOB Shipping to buyer
FOB Destination to seller
Warehouse expenditures
How is the gross margin calculated?
Gross Margin = Sales - COGS (BI + P - EI)
Describe the periodic inventory system
Inventory is counted at certain times throughout the period. Weighted average cost flow method is used
Describe the perpetual inventory system
Inventory count continually updated. Uses moving-average cost flow method
In periods of rising prices, under which cost flow system wound EI be the same under periodic & perpetual?
FIFO - both methods have the same EI
How is inventory turnover calculated?
COGS / Average Inventory (BI + EI / 2)
How is Average Day’s Sales in inventory calculated?
365 / Inventory Turnover
Under consigned goods, who holds the consigned goods in inventory?
Consignor holds inventory, which includes shipping to consignee
Under consignment system, does the consignee hold goods in inventory?
No - all goods remain in consignor until sold
What effect does over or under statement of inventory have on ending retained earnings?
Misstatement of BI does NOT have affect.
Misstatement of EI does have affect.
