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Lecture 8

RSM220H1 Lecture Notes - Lecture 8: Current AssetPremium

1 pages51 viewsSpring 2018

Department
Rotman Commerce
Course Code
RSM220H1
Professor
Amy Kwan
Lecture
8

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Is a current asset
One inventory account, Merchandise Inventory
Cost of inventory sold transferred to COGS
Merchandising company has:
Raw materials, direct labor, and manufacturing overhead make up work in progress
Raw materials, work in progress, finished goods
Expensed to Cost of Goods Manufactured
Manufacturing company has:
Held for sale in ordinary course of business
1.
In the process of production for such sale
2.
In the form of materials or supplies to be consumed in the production process or in the
rendering of services
3.
Definition
Generally determined by legal title
Goods in transit if f.o.b. destination
1.
Goods out on consignment
2.
Goods sold under buyback agreements
3.
Good sold with high rates of return that cannot be estimated
4.
Included in inventory
Commitment to purchase inventory but legal title has not yet been passed to buyer
Non-cancellable purchase contracts disclosed in notes if material but are not recorded
Unavoidable costs to complete contract are higher than expected benefits
Record loss provision for onerous contracts
Purchase contracts
Perpetual system
1.
Periodic system
2.
Accounting for inventory
Specific identification
1.
Weighted average
2.
FIFO
3.
Cost formulas
Recorded of lower of cost and NRV
Initially recorded at cost
NRV is estimated selling price less costs of sale
Loss if NRV less then cost becomes part of COGS
Measurement
Week 8: Inventory
March 12, 2018
RSM220 Page 1
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