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INVENTORY

INVENTORY. TANGIBLE ITEMS HELD FOR RESALE IN THE ORDINARY COURSE OF BUSINESS PRESENTED ON THE BALANCE SHEET UNDER CURRENT ASSETS AT THE LOWER OF COST OF MARKET. JOURNAL ENTRIES NEEDED. ACQUIRE ADJUST DISPOSE. TWO METHODS OF JOURNAL ENTRIES FOR INVENTORY. PERPETUAL PERIODIC.

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INVENTORY

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  1. INVENTORY • TANGIBLE ITEMS HELD FOR RESALE IN THE ORDINARY COURSE OF BUSINESS • PRESENTED ON THE BALANCE SHEET UNDER CURRENT ASSETS AT THE LOWER OF COST OF MARKET

  2. JOURNAL ENTRIES NEEDED • ACQUIRE • ADJUST • DISPOSE

  3. TWO METHODS OF JOURNAL ENTRIES FOR INVENTORY • PERPETUAL • PERIODIC

  4. PERPETUAL JOURNAL ENTRIES FOR INVENTORY • ACQUIRE • INVENTORY XXX • CASH XXX • FOR THE AMOUNT PAID

  5. TO SELL INVENTORY • CASH XXX • SALES XXX • COST OF GOODS SOLD YYY • INVENTORY YYY • THESE ARE TWO DIFFERENT NUMBERS. DEBIT CASH FOR THE AMOUNT RECEIVED FROM THE CUSTOMER, CREDIT INVENTORY FOR THE AMOUNT THE BUSINESS HAD TO PAY TO ACQUIRE THE INVENTORY

  6. WHICH INVENTORY IS SOLD • DEPENDS ON METHOD OF IDENTIFYING INVENTORY • FIRST IN FIRST OUT • LAST IN LAST OUT • WEIGHTED AVERAGE • SPECIFIC IDENTIFICATION

  7. FIFO • ASSUME FIRST ITEMS PURCHASED ARE THE FIRST ITEMS SOLD

  8. LIFO • ASSUMES LAST ITEM PURCHASED ARE THE FIRST ITEMS SOLD

  9. INVENTORY RECORD KEEPING • EXCEL SHEETS NEEDED: • LIST OF INVENTORY PURCHASED • LIST OF INVENTORY SOLD • LIST OF INVENTORY ON HAND

  10. INVENTORY SHEETS HEADINGS • DATE # OF UNITS COST/UNIT TOTAL

  11. COST OF GOODS SOLD STATEMENT • BEGINNING INVENTORY XXX • PLUS PURCHASES XXX • TOTAL AVAILABLE XXX • LESS ENDING INVENTORY XXX • COST OF GOODS SOLD XXX

  12. PERIODIC JOURNAL ENTRIES • ACQUIRE • PURCHASE XXX • CASH XXX

  13. TO SELL PERIODIC METHOD • CASH XXX • SALES XXX • NO ADJUSTMENT IS MADE TO INVENTORY AT THE TIME OF SALE

  14. END OF YEAR PERIODIC JOURNAL ENTRIES • INCOME SUMMARY XXX • INVENTORY XXX • CLEAN INVENTORY OUT TO ZERO • INVENTORY XXX • INCOME SUMMARY XXX • BRING INVENTORY TO THE ACTUAL PHYSICAL COUNT

  15. IF THERE IS A DECLINE IN THE VALUE OF THE INVENTORY • INVENTORY WAS PURCHASE FOR $10 BUT NOW ONLY WORTH $6 • DECLINE IN VALUE OF INVENTORY $4 • INVENTORY $4

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