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Inventories Chapter 7

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4 views2 pages

Inventories Chapter 7

IA1

Uploaded by

shielaKD05
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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INVENTORIES – CHAPTER 7

F/S Presentation – B/S (ENDING INVENTORY - ASSETS); I/S (BEGINNING INVENTORY – COST OF SALES)

PERPETUAL (inventory account / COGS) VS PERIODIC (purchases, PRA, freight-in) INVENTORY SYSTEM

PERIODIC INVENTORY SYSTEM


BI 100 (cost)
+P (net) 210 (cost)
=TGAS 310
-EI (count physically) 80 (asset)
COGS 230

Inventory XX
COGS XX

INVENTORY SHORTAGE OR OVERAGE – PERPETUAL INVENTORY SYSTEM only!


Per books – 100; Per count 80 – shortage

INVENTORY ERRORS –PERIODIC INVENTORY SYSTEM


TAMA SET-1 SET-2
BI 100 110 O/S 100
+P (net) 210 250 O/S 210
=TGAS 310 360 O/S 310
-EI 80 80 TAMA 130 O/S
COGS 230 280 O/S 180 U/S

SALES 700 700 700


COGS 230 280 180
GP 470 420 U/S 520 O/S

CONCLUSION:
1. If the BI & P is O/S, the COGS is also O/S, consequently the GP will be U/S
2. If the EI is O/S, the COGS is U/S, consequently the GP will be O/S
3. If the BI & P is U/S, the COGS is also U/S, consequently the GP will be O/S
4. If the EI is U/S, the COGS is O/S, consequently the GP will be U/S

MEASUREMENT – How much (lower of cost and NRV)


Inventory at cost P80K Inventory at NRV P90K
Inventory at cost P80K Inventory at NRV P75K

Total Manufacturing Cost


DM –
DL –
OH –
IM –
IL –
Prime Cost – DM + DL
Conversion – DL + OH
Excluded from the COST OF INVENTORY
A – abnormal losses
S – selling expenses
A – admin expenses
S – storage cost

Borrowing Cost – (interest) only if it was incurred a QUALIFYING ASSETS.


All expenses that will not be form part of the qualifying assets will be EXPENSED as incurred.
Deferred settlement terms – will be EXPENSED as incurred.

Cost of inventories purchased in a LUMPSUM


Selling at P5,000,000
FMV of each of the inventories
Allocation Cost of Invty
H– 4,000,000 4/8 2,500,000
L– 3,000,000 3/8 1,875,000
C– 1,000,000 1/8 125,000
Total – 8,000,000 P5,00,000

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