crosurl.blogg.se - Under a perpetual inventory system

This entry distributes the balance in the purchases account between the inventory that was sold (cost of goods sold) and the amount of inventory that remains at period end (merchandise inventory). The credit entry to balance the adjustment is $13,005, which is the total amount that was recorded as purchases for the period. Cost of goods sold was calculated to be $7,260, which should be recorded as an expense. The inventory at the end of the period should be $8,895, requiring an entry to increase merchandise inventory by $5,745. Journal entries are not shown, but the following calculations provide the information that would be used in recording the necessary journal entries. Merchandise inventory, before adjustment, had a balance of $3,150, which was the beginning inventory. (attribution: Copyright Rice University, OpenStax, under CC BY-NC-SA 4.0 license) Calculation for the Ending Inventory Adjustment under Periodic/Specific Identification Methods The cost of goods sold, inventory, and gross margin shown in Figure 10.5 were determined from the previously-stated data, particular to specific identification costing.įigure 10.6 Specific Identification Periodic Cost Allocations Gross Margin. The specific identification costing assumption tracks inventory items individually, so that when they are sold, the exact cost of the item is used to offset the revenue from the sale. Calculations of Costs of Goods Sold, Ending Inventory, and Gross Margin, Specific Identification Subtracting this ending inventory from the $16,155 total of goods available for sale leaves $7,260 in cost of goods sold this period. none of the 210 units that were purchased for $33 were sold, leaving all 210 of the $33 units remainingĮnding inventory was made up of 10 units at $21 each, 65 units at $27 each, and 210 units at $33 each, for a total specific identification ending inventory value of $8,895.160 of the 225 units that were purchased for $27 were sold, leaving 65 of the $27 units remaining.140 of the 150 units that were purchased for $21 were sold, leaving 10 of $21 units remaining.So for The Spy Who Loves You, considering the entire period together, note that

In this demonstration, assume that some sales were made by specifically tracked goods that are part of a lot, as previously stated for this method. The specific identification method of cost allocation directly tracks each of the units purchased and costs them out as they are actually sold.

Sold 180 units, 20 from Lot 1 (beginning inventory), costing $21 per unit 160 from the Lot 2 (July 10 purchase), costing $27 per unit.

Sold 120 units, all from Lot 1 (beginning inventory), costing $21 per unit.

The specific units assumed to be sold in this period are designated as follows, with the specific inventory distinction being associated with the lot numbers: Note: For simplicity of demonstration, beginning inventory cost is assumed to be $21 per unit for all cost assumption methods. Demand for the product has spiked during the current fiscal period, while supply is limited, causing the selling price to escalate rapidly. Parents benefit by being apprised of the child’s location, and the student benefits by not having to constantly check in with parents. It is being marketed to parents of middle school and high school students as a safety measure. Product: Global Positioning System (GPS) Tracking Deviceĭescription: This product is an economical real-time GPS tracking device, designed for individuals who wish to monitor others’ whereabouts. Let’s return to the example of The Spy Who Loves You Corporation to demonstrate the four cost allocation methods, assuming inventory is updated at the end of the period using the periodic system. Information Relating to All Cost Allocation Methods, but Specific to Periodic Inventory Updating Here we will demonstrate the mechanics used to calculate the ending inventory values using the four cost allocation methods and the periodic inventory system. The adjustment ensures that only the inventory costs that remain on hand are recorded, and the remainder of the goods available for sale are expensed on the income statement as cost of goods sold. As you’ve learned, the periodic inventory system is updated at the end of the period to adjust inventory numbers to match the physical count and provide accurate merchandise inventory values for the balance sheet.