inventory and cost of goods sold study guide

Understanding Inventory and Cost of Goods Sold LO6-1 We dealt with companies that provide a such as revenues by providing services to their customers. , and generate Types of Inventory What is Inventory in a company? Can you explain where "Inventory" is reported on what Financial Statement? What is Cost of Goods Sold? Provide Examples of Cost of Goods Sold: Manufacturing Companies Manufacturing companies produce Provide examples of Manufacturing Companies: With classifying inventory for a manufacturer, we have three categories: , and Merchandising Companies What are merchandisers? Provide me an example of a merchandiser: Wholesalers and Retailers What is the difference between Wholesalers and Retailers? Provide an example of Wholesalers and Retailers Flow of Inventory Costs Explain how inventory journey begins: Multiple-Step Income Statement LO6-2 What do we derive from a Single-Step Income Statement? What can we conclude from using a Multi-Step Income Statement? The Levels of Profitability What is Gross Profit? Provide the formula: Explain how does the business derive at Gross Profit? How do we calculate Gross Margin ratio? Explain Operating Income: How is it used within a business? What does it measure? In any business, we will have Income before Income taxes. Explain how a company will report this? How does a business derive at Net Income? Inventory Cost Methods LO6-3 We consider four methods for inventory costing: (1) Specific Identification - (2) First-in, first-out (FIFO) - (3) Last-in, first-out (LIFO) - (4) Weighted -Average Cost - Effects of Inventory Cost Methods LO6-4 Inventory Analysis LO6-7 How do we determine Inventory Tumover Ratio? How does Inventory Tumover Ratio affect a business? How do we determine Average Days in Inventory? How does Average Days in Inventory affect a business? LO6-3 1. A company purchased 80 units for $20 each on January 31. It purchased 170 units for $30 each on February 28. It sold 170 units for $50 each from March 1 through December 31. If the company uses FIFO inventory costing method, what is the amoumt of Cost of Goods Sold on the income statement for the year ending December 31 ? (Assume that the company uses a perpetual inventory system). 2. A company purchased 110 units for $30 each on January 31 . It purchased 170 units for $35 each on February 28. It sold 170 units for $80 each from March 1 through December 31 . If the company uses FiFO inventory costing method, what is the amount of Cost of Goods Sold on the income statement for the year ending December 31 ? (Assume that the company uses a perpetual inventory system). 3. Rally Wheels, Inc, had the following balances and transactions during 2018: 80 What would the company's ending merchandise inventory cost be on December 31, 2018 if the perpetual inventory system and LIFO inventory costing method are used? 4. Rally Wheels, Inc,, had the following balances and transactions during 2018: Beginning Merchandise Inventory 1/1/18 240 units at $73 March 10 Sold 80 units What would the company's ending merchandise inventory cort be on December 31, 2018 if the perpetual inventory system and LIFO inventory costing method are used? 5. Baldwin Inc., had the following balances and transactions during 2019: What would be reported as Cost of Goods Sold on the income statement for the year ending December 31,2019 if the perpetual inventory system and the FIFO inventory costing method are used? 6. Baldwin Inc., had the following balances and transactions during 2019: Beginning Merchandise Inventory 1/1/19 240 units at $72 What would be reported as Cost of Goods Sold on the income statement for the year ending December 31, 2019 if the perpetual inventory system and the FIFO inventory costing method are used? 7. Nathan, Inc. had the following balances and transactions during 2018 , from January 1 to December 31: What would be reported for ending Merchandise Inventory on the balance sheet at December 31, 2019 if the perpetual inventory system and the weighted -average inventory costing method are used? (Round units costs to two decimal places and total costs to nearest dollar.) 8. Nathan, Inc. had the following balances and transactions during 2018, fom January 1 to December 31: Beginning Merchandise Inventory 100 units at $82 What would be reported for ending Merchandise Inventory on the balance sheet at December 31, 2019 if the perpetual inventory system and the weighted -average inventory costing method are used? (Round units costs to two decimal places and total costs to nearest dollar.) 9. Classic Autos specializes in selling gently used specialty sports cars and uses the specific identification method of determining ending inventory and cost of goods sold. Item 507k was sold for $90,000. Classic purchased the sports car for $50,000 and paid $1,800 for freight in and $1,000 for freight out. What is the cost of goods sold? A. $51,800 B. $50,000 C. $51,000 D. $38,200 LO6-2 Determine the missing amount 10. L06-7 Using the amounts below, calculate the inventory turnover ratio, average days in inventory, and gross profit ratio