Exam 2 Chapter 5 Inventories and Cost of Sales

Merchandise inventory

includes all goods that a company owns and holds for sale, regardless of where the goods are located when inventory is counted

FOB shipping point

goods included in buyer’s inventory when shipped

FOB destination

goods included in buyer’s inventory after arrival at destination

Consignor

owner of goods

Consignee

sells goods for the owner

Net realizable value

Sales price - selling costs

Inventory cost

Invoice cost - discounts + other costs

Physical count

Manual process of verifying actual on-hand stock and reconciling it with recorded ledger quantities

4 methods to assign costs to inventory and to cost of goods sold

Specific identification,
First in, First-out
Last-in, First-out
Weighted average

Weighted average cost per unit at time of each sale

Cost of goods available for sale / Number of units available for sale