QST AC 221 Lecture Notes - Gross Profit, European Cooperation In Science And Technology, Write-Off

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20 Mar 2022

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Cost of sales is one of the largest single expenses. Inventory are goods held by a company for the purpose of sale to customers. Inventory is not goods held for consumption by the firm. Good sheld for firm consumption are supplies or supplies inventory . Inventories are assets bc firms expect to sell the inventories for cash or cash equivalents. When the firm sells the inventory, they consume the assets and record an expense on the is. Sales revenue - cogs = gross profit. 1) company has unrestricted right to use (legal title) 2) future benefits that can be measured. Record inventory transaction when ownership is transferred (control is now with the purchaser) Supplier specifies fob shipping point or fob destination . Fob shipping point: ownership is transferred to the buyer at the time of shipment. Buyer will own the goods as soon as they leave warehouse.

Related Questions

1. What is the differencebetween inventory and cost of goods sold? Cost of goods sold andsales revenue?

2. Is gross profit an account?

3. ComstockCompany counted their inventory at the end of the year and had 220units. Included in that amount were 20 units Comstock held onconsignment from Davidson Inc. Comstock purchased 50 units ofinventory on December 27, FOB shipping point. How many units ofinventory should Comstock report on its year-end balancesheet?

4. Assume Comstock wasunable to count its ending inventory because it was destroyed in afire. Use the gross profit method to estimate the ending inventory.The gross profit rate is 52%.

Beginninginventory

Endinginventory

Netpurchases

Net sales

$ 10,000

110,000

175,000

Note 15 reveals that the balance sheet inventory amount consistsof three types of inventory. What

types of costs do you expect to be in the raw materialsinventory? In the work-in-process inventory?

In the finished goods inventory

Note 15. INVENTORIES

Most inventories owned by Deere & Company and its

U.S. equipment subsidiaries are valued at cost, on theâlast-in,

first-outâ (LIFO) basis. Remaining inventories are generally

valued at the lower of cost, on the âfirst-in, first-outâ(FIFO)

basis, or market. The value of gross inventories on the LIFO

basis represented 61 percent and 59 percent of worldwidegross

inventories at FIFO value at October 31, 2012 and 2011,

respectively. If all inventories had been valued on a FIFObasis,

estimated inventories by major classification at October 31in

millions of dollars would have been as follows:

2012 2011

Raw materials and supplies........................................... $ 1,874 $ 1,626

Work-in-process........................................................... 652647

Finished goods and parts.............................................. 4,065 3,584

Total FIFO value........................................................ 6,5915,857

Less adjustment to LIFO value....................................... 1,421 1,486

Inventories................................................................. $5,170 $ 4,371

When does the cost of inventory become an expense?

a. When payment is made to the supplier

b. When inventory is purchased from the supplier

c. When cash is collected from the customer

d. When inventory is delivered to a customer

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QST AC 221 Lecture Notes - Gross Profit, European Cooperation In Science And Technology, Write-Off

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