Merchandising and Inventory Merchandising involves selling inventory. Inventory is usually an important asset. Inventory must be accounted for periodically or perpetually. Traditional periodic method is often being replaced by perpetual inventory accounting c8-6
C8 - 6 Merchandising and Inventory Merchandising involves selling inventory. Inventory is usually an important asset. Inventory must be accounted for periodically or perpetually. Traditional periodic method is often being replaced by perpetual inventory accounting
Advantages of Using Perpetual Inventory Continuous determination of inventory value Continuous determination of gross profit Affordable with computers, scanners and bar codes on most products Perpetual inventory accounting provides management controls Managers know which items are selling fastest and the profit margin on those items c8-7
C8 - 7 Continuous determination of inventory value Continuous determination of gross profit Affordable with computers, scanners, and bar codes on most products Perpetual inventory accounting provides management controls. Managers know which items are selling fastest and the profit margin on those items. Advantages of Using Perpetual Inventory
Perpetual Inventory Costs Inventory cost data to demonstrate FIFO and LIFO Perpetual Systems Item 127B Units Cost Price Jan. 1 Inventory 10 $20 4 Sale $30 10 Purchase 22 Sale 7842 31 28 Sale 32 30 Purchase 10 22 Sale price assumptions are added to demonstrate journal entries and ease of calculating gross profit c8-8
C8 - 8 Perpetual Inventory Costs Inventory cost data to demonstrate FIFO and LIFO Perpetual Systems Cost of Mdse. Sold Item 127B Units Cost Price Jan. 1 Inventory 10 $20 4 Sale 7 $30 10 Purchase 8 21 22 Sale 4 31 28 Sale 2 32 30 Purchase 10 22 Sale price assumptions are added to demonstrate journal entries and ease of calculating gross profit
FIFO Perpetual Inventory Account Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty.I Cost Cost Qty. CostCost Qty.I Cost Cost Jan. 1 10 20200 20 140 3 2060 The sale of 7 units leaves a balance of 3 units c8-9
C8 - 9 Jan. 1 10 20 200 4 7 20 140 3 20 60 Item 127B FIFO Perpetual Inventory Account Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost The sale of 7 units leaves a balance of 3 units
FIFO Perpetual Inventory Account Item 127B Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. CostCost Qty. Cost Cost Jan 1 10 20200 20 140 3 60 10821168 3 2060 21168 Because the purchase price of $21 is different than the cost of the previous 3 units on hand, the inventory balance of 11 units is accounted for separately c8-10
C8 - 10 Jan. 1 10 20 200 4 7 20 140 3 20 60 10 8 21 168 3 20 60 8 21 168 Item 127B FIFO Perpetual Inventory Account Purchases Cost of Mdse. Sold Inventory Balance Unit Total Unit Total Unit Total Date Qty. Cost Cost Qty. Cost Cost Qty. Cost Cost Because the purchase price of $21 is different than the cost of the previous 3 units on hand, the inventory balance of 11 units is accounted for separately