Contabilidad

Bsica I
ACCO 111
Taller Seis
Profesor
Noel Ortiz
Torres

Universidad del Este, Universidad Metropolitana,Universidad del Turabo

REPASO
1. Entradas sistema de registro de compras y
ventas de mercadera bajo sistema de
inventario peridico.
2. Entradas sistema de registro de compras y
ventas de mercadera bajo sistema de
inventario perpetuo.
3. Estado de ingresos y gastos de pasos
mltiples para un negocio de compra y ventas
de mercaderas.

Prctica

Prepare las entradas de jornal utilizando el sistema

perpetuo y peridico.
Mayo 4 Sauk Stereo compr a crdito $3,800 en
mercanca, 2/10, n/30 a PW Audio supply.
Mayo 6

Sauk Stereo pag fletes por $150.

Mayo 8

Sauk Stereo devolvi mercanca por $300.

Mayo 14

Sauk Stereo pag a PW Audio supply.

TALLER SEIS

Inventario

OBJETIVOS
1. Reconocer los conceptos relacionados con los
flujos de costos y sus alternativas en la
valoracin del inventario.
2. Identificar los mtodos para la estimacin del
inventario.
3. Identificar los efectos de los errores al
reportar el inventario.

Inventario
Clasificacin del inventario

Compaa de
compra y
venta
1. Merchandise

Inventory

Manufactura

1. Raw material
2. Work in process
3. Finished goods

Physical Inventory taken

for two reasons:
Perpetual System
1. Check accuracy of inventory records.
2. Determine amount of inventory lost (wasted

raw materials, shoplifting, or employee theft).

Periodic System
1. Determine the inventory on hand
2. Determine the cost of goods sold for the

period.

Taking a Physical Inventory

Involves counting, weighing, or measuring
each kind of inventory on hand.
Taken,
when the business is closed or when
business is slow.
at end of the accounting period.

Determining Ownership of
Goods
Goods in Transit
Purchased goods not yet received.
Sold goods not yet delivered.
Goods in transit should be included in the
inventory of the company that has legal title to
the goods. Legal title is determined by the terms
of sale.

Terms of Sale

Ownership of the goods

passes to the buyer
when the public carrier
accepts the goods from
the seller.
Ownership of the goods
remains with the seller
until the goods reach the
buyer.

Review Question

Goods in transit should be included in the

inventory of the buyer when the:
a. public carrier accepts the goods from the
seller.
b. goods reach the buyer.
c. terms of sale are FOB destination.
d. terms of sale are FOB shipping point.

Determining Ownership of
Goods
Consigned Goods
In

some lines of business, it is common to

hold the goods of other parties and try to sell
the goods for them for a fee, but without
taking ownership of goods.
These

are called consigned goods.

Unit costs can be applied to quantities

on hand using the following costing
methods:
Specific Identification
First-in, first-out (FIFO)
Last-in, first-out (LIFO)
Average-cost

Cost Flow
Assumption
s

Example

Young & Crazy Company makes the following

purchases:
1.

One item on 2/2/15for $10

2.

One item on 2/15/15 for $15

3.

One item on 2/25/15 for $20

Young & Crazy Company sells one item on 2/28/15

for $90. What would be the balance of ending
inventory, cost of goods sold, and net income for
the month ended Feb. 28, 2015, assuming the
company used the Specific Identification
method to cost inventories and the item purchased
on 2/15/15 is sold? Assume a tax rate of 30%.

Specific Identification
Inventory
Balance = $ 30
Purchase on
2/25/15 for $20
Purchase on
2/15/15 for $15
Purchase on
2/2/15 for $10

Young & Crazy Company

Income Statement
For the Month of Feb. 2015
Sales
Cost of goods sold
Gross profit
Expenses:
Administrative
Selling
Interest
Total expenses
Income before tax
Taxes
Net Income

$ 90
15
75
14
12
7
33
42
13
$ 29

Specific Identification Method

An actual physical flow costing method in
which items still in inventory are specifically
costed to arrive at the total cost of the ending
inventory.
Practice is relatively rare.
Most companies make assumptions (Cost
Flow Assumptions) about which units
were sold.

Example

Young & Crazy Company makes the following

purchases:
1.

One item on 2/2/15 for $10

2.

One item on 2/15/15 for $15

3.

One item on 2/25/15 for $20

Young & Crazy Company sells one item on 2/28/15

for $90. What would be the balance of ending
inventory, cost of goods sold, and net income for
the month ended Feb. 2015, assuming the
company used the FIFO, LIFO, and Average-cost
flow assumptions? Assume a tax rate of 30%.

First-In-First-Out
(FIFO)
Earliest goods purchased are first to be
sold.
Often parallels actual physical flow of
merchandise.
Generally good business practice to sell
oldest units first.

First-In-First-Out
(FIFO)
Inventory
Balance = $ 35
Purchase on
2/25/15 for $20
Purchase on
2/15/15 for $15
Purchase on
2/2/15 for $10

Young & Crazy Company

Income Statement
For the Month of Feb. 2015
Sales
Cost of goods sold
Gross profit
Expenses:
Administrative
Selling
Interest
Total expenses
Income before tax
Taxes
Net Income

$ 90
10
80
14
12
7
33
47
14
$ 33

Last-In-First-Out (LIFO)

Latest goods purchased are first to be

sold.
Seldom coincides with actual physical
flow of merchandise.
Exceptions include goods stored in piles,
such as coal or hay.

Last-In-First-Out
(LIFO)
Inventory
Balance = $ 25
Purchase on
2/25/15 for $20
Purchase on
2/15/15 for $15
Purchase on
2/2/15 for $10

Young & Crazy Company

Income Statement
For the Month of Feb. 2015
Sales
Cost of goods sold
Gross profit
Expenses:
Administrative
Selling
Interest
Total expenses
Income before tax
Taxes
Net Income

$ 90
20
70
14
12
7
33
37
11
$ 26

Average-Cost

Allocates cost of goods available for sale

on the basis of weighted average unit
cost incurred.
Assumes goods are similar in nature.
Applies weighted average unit cost to the
units on hand to determine cost of the
ending inventory.

Average Cost

Inventory
Balance = $ 30
Purchase on
2/25/15 for $20
Purchase on
2/15/15 for $15
Purchase on
2/2/15 for $10

Young & Crazy Company

Income Statement
For the Month of Feb. 2015
Sales
Cost of goods sold
Gross profit
Expenses:
Administrative
Selling
Interest
Total expenses
Income before tax
Taxes
Net Income

$ 90
15
75
14
12
7
33
42
13
$ 29

Comparative Financial Statement Summary

FIFO

Average

LIFO

$90

$90

$90

10

15

20

80

75

70

Admin. & selling expense 33

33

33

Income before taxes

47

42

37

Income tax expense

14

13

11

Net income

$33

$29

$26

Inventory balance

$35

$30

$25

Sales
Cost of goods sold
Gross profit

In Period of Rising Prices, FIFO Reports:

FIFO

Average

LIFO

$90

$90

$90

10

15

20

80

75

70

Admin. & selling expense 33

33

33

Income before taxes

47

42

37

Income tax expense

14

13

11

Net income

$33

$29

$26

Inventory balance

$35

$30

$25

Sales

Lowest

Cost of goods sold

Gross profit

Highes
t

In Period of Rising Prices, LIFO Reports:

FIFO

Average

LIFO

$90

$90

$90

10

15

20

80

75

70

Admin. & selling expense 33

33

33

Income before taxes

47

42

37

Income tax expense

14

13

11

Net income

$33

$29

$26

Inventory balance

$35

$30

$25

Sales

Highes
t

Lowes
t

Cost of goods sold

Gross profit

Review Question
The cost flow method that often parallels the
actual physical flow of merchandise is the:
a. FIFO method.
b. LIFO method.
c. average cost method.
d. gross profit method.

Review Question
In a period of inflation, the cost flow method
that results in the lowest income taxes is the:
a. FIFO method.
b. LIFO method.
c. average cost method.
d. gross profit method.

Lower-of-Cost-or-Market

When the value of inventory is lower than its

cost
Companies can write down the
inventory to its market value in the period
in which the price decline occurs.
Market value = Replacement Cost
Example of conservatism.

Lower-of-Cost-or-Market

BE6-7 Alou Computer Center accumulates the

following cost and market data at December 31.

$ 12,000
9,000
12,800
$ 33,800

Compute the lower-of-cost-or-market valuation for

the companys total inventory.

Errores en Inventario
Common Cause:
Failure to count or price inventory
correctly.
Not properly recognizing the transfer of
legal title to goods in transit.
Errors affect both the income statement
and balance sheet.

Income Statement Effects

Inventory errors affect the computation of cost of
goods sold and net income.

Errores Inventario
Income Statement Effects
Inventory errors affect the computation of cost of
goods sold and net income in two periods.
An error in ending inventory of the current
period will have a reverse effect on net
income of the next accounting period.
Over the two years, the total net income is
correct because the errors offset each other.
The ending inventory depends entirely on the
accuracy of taking and costing the inventory.

ERRORES DE INVENTARIO

Combined income for

year period is correct.

2-

($3,000)
Net Income
understated

$3,000
Net Income
overstated

Understating ending inventory will overstate:

a. assets.
b. cost of goods sold.
c. net income.
d. owner's equity.

ERRORES DE INVENTARIO
Balance Sheet Effects
Effect of inventory errors on the balance sheet is
determined by using the basic accounting
equation:

Presentation
Balance Sheet - Inventory classified as current
asset.
Income Statement - Cost of goods sold
subtracted from sales.
There also should be disclosure of
1) major inventory classifications,
2) basis of accounting (cost or LCM), and
3) costing method (FIFO, LIFO, or average).

Inventory
management is a
double-edged sword

1. High Inventory Levels - may incur high

carrying costs (e.g., investment, storage,

insurance, obsolescence, and damage).
2. Low Inventory Levels may lead to

stockouts and lost sales.

Inventory turnover measures the

number of times on average the
inventory is sold during the period.

Inventory
Turnover

Cost of Goods Sold

=

Average Inventory

Days in inventory measures the average

number of days inventory is held.
Days in Year (365)
Days in
=
Inventory
Inventory Turnover

At December 31, 2015, the following

information was available for J. Graff Company:
ending inventory $40,000, beginning inventory
$60,000, cost of goods sold $270,000, and
sales revenue $380,000. Calculate inventory
turnover and days in inventory for J. Graff
$270,000
Company.
Inventory
=
5.4
Turnover
($60,000 + 40,000) /
2
365
67.59
Days in
=
days
Inventory
5.4

INVENTORY COST FLOW METHODS IN PERPETUAL

INVENTORY SYSTEMS

The following data from Houston Electronics will be used to

illustrate inventory costing under a perpetual system.

INVENTORY COST FLOW METHODS IN PERPETUAL

INVENTORY SYSTEMS
Computation of cost of goods sold and ending inventory
under FIFO for Houston Electronics.

Cost of goods
sold
Ending
inventory

INVENTORY COST FLOW METHODS IN PERPETUAL

INVENTORY SYSTEMS

Computation of cost of goods sold and ending inventory under

LIFO for Houston Electronics.

Cost of goods sold

Ending
inventory

INVENTORY COST FLOW METHODS IN PERPETUAL INVENTORY

SYSTEMS
Computation of cost of goods sold and ending inventory under
moving average for Houston Electronics.

Cost of goods sold

Ending
inventory