ADM 1340 Lecture Notes - Lecture 5: Income Statement, Profit Margin, Operating Expense

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ambercat292

9 May 2016

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ADM 1340 Full Course Notes

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Companies that produce goods for sale are called manufacturers. Detailed records of the cost of each inventory purchase and sale are maintained. Cost of goods sold is determined each time a sale occurs. Inventory records are up to date and provide timely info to management. Cost of goods sold determined only at end of accounting period. Physical inventory count at end of accounting period determines ending inventory. Do not form part of the cost of the merchandise. Costs of transporting the goods to the buyer"s place of business freight terms state who pays the freight charges. Goods are delivered by the seller to the point of shipping. The buyer pays the freight costs to get the goods from the point of shipping to the destination. The buyer is responsible for any damage that may occur along the way. Freight cost is part of the cost of purchasing the inventory. Perpetual: debit merchandise inventory, credit cash or ap.

Related Questions

Which of the following statements about a periodic inventory system is true?

Companies continuously maintain detailed records of the cost of each inventory purchase and sale.
The periodic system provides better control over inventories than a perpetual system.
Companies determine cost of goods sold only at the end of the accounting period.
The increased use of computerized systems has increased the use of the periodic system.

graysardine234

Which of the following statements about a periodic inventory system is true?

a. The increased use of computerized systems has increased the use of periodic systems.

b. The periodic system provides better control over inventories than a perpetual system

c. The company continuously maintained detailed records of the cost of each purchase and sale.

d. Companies determine the cost of goods sold only at the end of the accounting period.

carmineserval589

Scroll down to complete all parts of this task.

Select from the option list provided the inventory cost flowassumption for each explanation below. Each choice may be usedonce, more than once, or not at all.

Item	Answer
1. Results in the highest cost of goods sold if prices arerising.
2. Unaffected by whether a perpetual or periodic system is usedif goods are not specifically identified.
3. Reflects the actual physical flow of goods.
4. Determines cost only at period end but usable in a perpetualsystem that records only quantities.
5. Ending inventory approximates current replacement cost.
6. Requires an estimate of price-level changes for specificinventories.

Scroll down to complete all parts of this task.

Select from the option list provided the inventory cost flowassumption for each explanation below. Each choice may be usedonce, more than once, or not at all.

Item Answer

1. Results in the highest cost of goods sold if prices arerising.

2. Unaffected by whether a perpetual or periodic system is usedif goods are not specifically identified.

3. Reflects the actual physical flow of goods.

4. Determines cost only at period end but usable in a perpetualsystem that records only quantities.

5. Ending inventory approximates current replacement cost.

6. Requires an estimate of price-level changes for specificinventories.

ADM 1340 Lecture Notes - Lecture 5: Income Statement, Profit Margin, Operating Expense

ADM 1340 Full Course Notes

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