...Cost of Goods Sold Theresa Gillette XACC/290 - PRINCIPLES OF ACCOUNTING I November 9, 2014 Instructor: RASHAD ABDULLAH Cost of Goods Sold As an example of how it would be done I have added a diagram showing how you would process the cost of the goods sold. First you need to have the cost of the beginning inventory then you have to add the amount of the purchases and subtract the ending amount of the inventory. When everything is said and done it equals out to the cost of the goods that have been sold. Cost of goods sold is the accumulated total of all the costs used to create a product or service in this case it is which has been sold. All of these costs fall into a general sub category of direct labor as well as the materials, and overhead stock. The cost of goods sold is considered to be a part of the labor and payroll taxes. Beginning Inventory |+ |Purchases |- |Ending Inventory |= |Cost of Goods Sold | |$600 |+ |$1500 |- |$400 |= |$1700 | |$800 |+ |$2400 |- |$600 |= |$2600 | |There is also a first in and first out method that helps with keeping track of the inventory. So when things come in the stuff that is older should move forward and the new stuff should go in back. I believe that when it comes down to it the way we handle the sales of the products then the company should not have a problem with keeping track of the funds coming in and going out. Below I have added the example of how it should work. I have done...
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...Interpreting Cost of Goods Sold and Inventory ANSWERS TO QUESTIONS 1. Inventory often is one of the largest amounts listed under assets on the balance sheet which means that it represents a significant amount of the resources available to the business. The inventory may be excessive in amount, which is a needless waste of resources; alternatively it may be too low, which may result in lost sales. Therefore, for internal users inventory control is very important. On the income statement, inventory exerts a direct impact on the amount of income. Therefore, statement users are interested particularly in the amount of this effect and the way in which inventory is measured. Because of its impact on both the balance sheet and the income statement, it is of particular interest to all statement users. 2. Fundamentally, inventory should include those items, and only those items, legally owned by the business. That is, inventory should include all goods that the company owns, regardless of their particular location at the time. 3. The cost principle governs the measurement of the ending inventory amount. The ending inventory is determined in units and the cost of each unit is applied to that number. Under the cost principle, the unit cost is the sum of all costs incurred in obtaining one unit of the inventory item in its present state. 4. Goods available for sale is the sum of the beginning inventory and the amount of goods purchased during the period. Cost of goods sold...
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...Cost of Goods Kattlin Diaz XACC/290 December 13, 2014 Kevin Goff The calculations of cost of goods sold is one of the more difficult accounting tasks. There are many variables that need to be taken into account. The size of a business, the type of business, and the accounting system used are also factors that must be used to make a determination between the periodic and the perpetual system. These two main systems are what is used for calculating cost of goods sold. The perpetual method is one that I am in favor of because it is a more up-to-date method. The use of current technology gives this system a clear advantage, and the cost for this technology is an expense worth taking. In the perpetual system, companies maintain detailed records of the cost of each inventory purchase and sale. This gives the company continuous track of the inventory that should be on hand for every item and the cost of goods sold each time a sale occurs. The second system is the periodic system. In this system companies do not keep detailed inventory records of goods sold throughout the period, but rather calculate the cost of goods sold only at the end of their accounting period. This is the time when the company takes a physical inventory and calculates the cost of goods sold. Overall, the cost of goods sold is a very important part of business and helps companies like Wal-Mart know what is selling and what is not. I am glad that we have computers and programs that make this...
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...a. What are the likely reasons that the cost of goods sold to sales percentage for Coca-Cola is lower than that for PepsiCo? Generally when a company has higher COGS compared to another, the first place that one should look is the SG&A to determine if there is a different method of allocating costs between the two companies. Such was the case in the P&G, Colgate and Unilever case that we investigated, whereas Unilever relies more heavily on COGS, while P&G and Colgate rely more on SG&A. Upon comparison between Pepsi and Coca-Cola in this aspect, it is surprising to evidence that while the COGS are disproportionately higher for Pepsi, their SG&A are very similar. This would mean that their cost distribution is similar, and yet for Pepsi there should be something additional that is raising their COGS considerably. To this end, I have two theories, which are not mutually exclusive: (i) Competitors but different segments: Although both companies are presumably competitors, it is evident that Coca-Cola engages almost exclusively in beverages, where Pepsi also engages in the manufacture and distribution of packaged foods. Therefore, their peer comparison must be done under the optic that PepsiCo has an additional commercial activity to that of Coca-Cola. This is evidenced in their annual report by which almost half of their activity is in Food. Therefore, it would we safe to state that the COGS that are greater in comparison to Coca-Cola might come from the added expenses...
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...1 Cost of Goods Available for Sales FIFO Amount Units Cost of Goods Sold 26,400.00 740 Endng Inventory 33,040.00 200 59,440.00 940 LIFO Amount Units Cost of Goods Sold 24,000.00 740 Endng Inventory 35,440.00 200 59,440.00 940 Specific Identification Amount Units Cost of Goods Sold 24,000.00 740 Endng Inventory 35,440.00 200 59,440.00 940 Weighted Average Amount Units Cost of Goods Sold 25,384.00 740 Endng Inventory 34,056.00 200 59,440.00 940 2 to 3 A. FIFO Goods Purchased Cost of Goods Sold Inventory Balance Date Qty Unit Cost Total Cost Qty Unit Cost Total Cost Qty Unit Cost Total Cost January 1 Beginning Balance 600 44.00 26,400.00 February 10 200 40.00 8,000.00 600 44.00 34,400.00 200 40.00 March 13 100 20.00 2,000.00 600 44.00 36,400.00 200 40.00 100 20.00 March 15 400 44.00 17,600.00 200 44.00 18,800.00 200 40.00 100 20.00 August 21 160 60.00 9,600.00 ...
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...PROBLEM 3-46 (35 MINUTES) 1. Predetermined overhead rate = budgeted overhead ÷ budgeted direct-labor cost = $5,460,000 ÷ $4,200,000 = 130% of direct labor cost 2. Additions (debits) total $15,605,000 [$5,600,000 + $4,350,000 + ($4,350,000 x 130%)]. 3. The finished-goods inventory consisted of job no. 2143, which cost $351,500 [$156,000 + $85,000 + ($85,000 x 130%)]. 4. Since there is no work in process at year-end, all amounts in the Work-in-Process account must be transferred to Finished-Goods Inventory. Thus: Finished-Goods Inventory 15,761,800* Work-in-Process Inventory 15,761,800 *Beginning balance in Work-in-Process Inventory + additions to the account: $156,800 + $15,605,000 = $15,761,800 5. Finlon’s applied overhead totals 130% of direct-labor cost, or $5,655,000 ($4,350,000 x 130%). Actual overhead was $5,554,000, itemized as follows, resulting in overapplied overhead of $101,000. |Indirect materials used | $ 65,000 | |Indirect labor | 2,860,000 | |Factory depreciation | 1,740,000 | |Factory insurance | 59,000 | |Factory utilities | 830...
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...…………………. Direct materials used ……………………. 705,000 Cost of goods manufactured: Beginning work in process ……………… 120,000 Direct materials used ……………………. 705,000 Direct labor ……………………………… 135,000 Manufacturing overhead ………………… 370,000 Ending work in process …………………. Cost of goods manufactured …………... 1,200,000 2. | |Cost |Cost Type | | |a. The cost of the memory chip used in the radar sets |Product Cost | | |b. Factory heating costs |Product Cost | | |c. Factory equipment maintenance costs |Product Cost | | |d. Training costs for new administrative employees |Period Cost | | |e. The cost of the solder that is used in assembling the radar sets |Product Cost | | |f. The travel costs of the company’s salespeople |Period Cost | | |g. Wages and...
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...April 10 | Sale | 60 | 5,000 | 300,000 | April 19 | Sale | 30 | 5,000 | 150,000 | April 28 | Purchase | 100 | 2,200 | 220,000 | Required: 1. Record the inventory, purchases and cost of goods sold in a Perpetual Inventory record using the FIFO method. 2. Determine the total sales and the total cost of goods sold for the period. Journalize the entries in the sales and cost of goods sold account. Assume that all sales were on account. 3. Determine the gross profit from sales for the period. Sales Revenue: $400,000 + $250,000 + $300,000 + $150,000 = $1,100,000 Cost of Goods Sold: $126,000 + $90,000 + $110,000 + $60,000 = $386,000 Gross Profit: Sales Revenue – Cost of Goods Sold $1,100,000 - $386,000 = $714,000 4. Determine the ending inventory value at LCM (Market price $ 1800 per unit). 5. Discuss which method (FIFO or LIFO) would be preferred for income tax purposes in periods of: a) Rising prices and I. FIFO gives a better indication of the ending inventory value. II. FIFO increases net income because old inventory (lower price) is used to value the cost of goods sold. This increases company taxes. III. LIFO is not a good indication of the ending inventory value. IV. LIFO results in lower net income because cost of goods sold is higher. This decreases company taxes. b) Declining prices. I. LIFO gives a better indication of the ending inventory value....
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...(1)topic notes (over 100pages; $80) (2) pastpaper analysis (about 20 pages; $20) ★★ Paper 2 cost accounting 只有1 part - (1) pastpaper analysis (about 20 pages; $20) 歡迎留email，拎Sample。 General reminders |If mark-up or margin are given, the questions may require | |to find out the sales figures (cash or credit sales) | |to find out the inventory lost (by computing COGS) | |to find out the cost | |(required for RO, DR, closing inventory) | |to find out the selling price | |(required for RI, DA) | | | |Be reminded | |to isolate the effect of abnormal cost before using the mark-up and margin...
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...Accounts Payable | 800 | | Inventory | | 800 | (Return inventory on account) | | November 11 | | | | Accounts Payable | 7,200 | | Inventory | | 144 | Cash | | 7,056 | (Pay on account less 2% discount)($110 = $5,500 × 2%) | | November 16 | | | | Accounts Receivable | 13,000 | | Sales Revenue | | 13,000 | (Sell inventory on account) | | Cost of Goods Sold | 9,800 | | Inventory | | 9,800 | (Cost of inventory sold) | | ($9,800 = ($95 × 50 units) + ($101 × 50 units)) | | November 20 | | | | Cash | 13,000 | | Accounts Receivable | | 13,000 | (Receive cash on account) | | Problem 6-6B (continued) Requirement 1 (continued) November 21 | | Debit | Credit | Inventory | 6,300 | | Accounts Payable | | 6,300 | (Purchase inventory on account) | | November 24 | | | | Cash | 8,100 | | Sales Revenue | | 8,100 | (Sell inventory for cash) | | Cost of Goods Sold | 7,270 | | Inventory | | 7,270 | (Record cost of inventory sold)($7,270 = ($101 × 20 units) + ($105 × 50 units)) | Requirement 2 November 30 | | Debit | Credit | Cost of...
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...elimination of the intercompany sales of merchandise does affect the amount of reported consolidated income. This is because the sales are eliminated from the intercompany financial statements to eliminate the double accounting of recording sales and profits twice. Consolidated net income will be unaffected. 2. The effect of eliminating profit on intercompany sales after deducting selling and administrative expenses rather than gross profit is to include selling and administrative expenses associated with the intercompany sale in consolidated inventories. Support for the gross profit approach is based on the proposition that consolidated inventory balances should include manufacturing costs only and that generally accepted accounting standards normally preclude the capitalization of selling and administrative costs. 3. When the subsidiary is the intercompany seller, the unrealized profit is shown in the accounts of the S Company. These accounts provide the starting point for the calculation of the non-controlling share of current year earnings. If the unrealized profit are not eliminated it would result in the overstatement of the non-controlling share in profits. On the other hand, when the parent is the intercompany seller, the unrealized profit is shown in the accounts of the parent company. Since the non-controlling interest does not share in the earnings of P Co., the non-controlling interest is not affected by the unrealized profit therein. 4. The only procedural difference in the...
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...6-3A Cost of goods available for sale = 2970+9680+6325+9240+3080 = $31295 Total Units = 165+440+275+385+110 = 1375 units Average cost per unit = 31295/1375 = $22.76 Ending Inventory = 1375 – 1100 = 275 units FIFO Ending Inventory = (110 x 28) + (165 x 24) = 3080 + 3960 = $7040 Cost of goods sold= 31295 – 7040 = $24255 LIFO Ending Inventory = (165 x 18) + (110 x 22) = 2970 + 2420 = $5390 Cost of goods sold= 31295 – 5390 = $25905 Average Cost Ending Inventory = 275 x 22.76 = $6259 Cost of goods sold= 31295 – 6259 = $25036 Highest Inventory amount= FIFO $7040 Highest Cost of goods sold= LIFO $25905 Problem 6-5A Weighted average cost per unit...
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...including dining, kitchen, bed and bath soft goods, glassware, china, and cutlery, and assorted décor items. The company’s founder, Terrence Ransom, opened the first store in 1960. The company has grown to 154 retail stores throughout North America. In 1968 the company launched its direct-to-customer sales channel through a seasonal mail-order catalogue, and in 2000 direct-to-customer sales were brought online when the company introduced its e-commerce website, newporthome.com. Currently the retail and direct-to-customer sales channels are supported by distribution centers in Portland, Oregon, and Charlotte, North Carolina, providing 1.8 million square feet, and call and data processing centers in Syracuse, New York, and Moorhead, Minnesota. The company’s corporate offices and design studio are located in Providence, Rhode Island. Mr. Ransom founded the company with the goal of providing customers quality, creativity, and style. Product buyers and designers at Newport Home keep a close eye on fashion trends worldwide, so the company can respond to changes in customer preferences quickly. Over the years management has tried to position the company as a fashion leader rather than a follower, helping insure the success of its design concepts. Company management believes the key to success is to carry a mix of signature products and a fresh array of seasonal products throughout the year. Signature products, consisting mainly of big-ticket hard goods such as IM A Ed u c AtIo nA L c A S E...
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... first out inventory (LIFO) method, the cost of the last goods received are charged to cost of goods sold and matched with revenue from sales. When first in, first out inventory (FIFO) method is used, the items in the beginning inventory are assumed to be sold first. Sales are assumed to come in the order in which they are purchased allowing the costs of the last items received are assigned to the ending inventory and the remaining costs. When weighted average inventory is used, the unit prices of the beginning inventory and of each purchase are weighted by the number of units in the beginning inventory and each purchase. The total of these amounts is then divided by the number of units available for sale to find the weighted-average cost per unit. In a changing market where prices are rising or falling each method gives a different result. Weighted average costs tend to smooth out price fluctuations. FIFO provides an inventory valuation on the balance sheet that mostly approximates current replacement cost. LIFO causes the last costs incurred to be assigned to cost of goods sold, therefore resulting in a better matching of current costs with revenues on the income statement. Weighted average costs tend to smooth out price fluctuations. Example: If purchase prices are rising in a period, FIFO results in the lowest cost of goods sold, highest gross profit, and the highest net income. LIFO results in the highest cost of goods sold and the lowest gross profit, and the lowest...
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...Calculating Inventory Finlon Upholstery Inc. uses a job-order costing system to accumulate manufacturing costs. The company's work-in-process on December 31, 2001, consisted of one job (no. 2077), which was carried on the year-end balance sheet at $156,800. There was no finished-goods inventory on this date. Finlon applies manufacturing overhead to production on the basis of direct-labor cost. (The budgeted direct-labor cost is the company's practical capacity, in terms of direct-labor hours multiplied by the budgeted direct-labor rate.) Budgeted totals for 2002 for direct labor and manufacturing overhead are $4,200,000 and $5,460,000, respectively. Actual results for the year are as follows: Actual Results | Direct Materials Used | $5,600,000.00 | Direct Labor | $4,350,000.00 | Indirect Material Used | $65,000.00 | Indirect Labor | $2,860,000.00 | Factory Depreciation | $1,740,000.00 | Factory Insurance | $59,000.00 | Factory Utilities | $830,000.00 | Selling and Administrative Expenses | $2,160,000.00 | Total | $17,664,000.00 | Job no. 2077 was completed in January 2002, and there was no work in process at year-end. All jobs produced during 2002 were sold with the exception of Job no. 2143, which contained direct-material costs of $156,000 and direct-labor charges of $85,000. The company charges any under- or over-applied overhead to the cost of goods sold category. Using the above information, do the following: * Calculate the company’s predetermined...
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