Assignment: chap7_hw_cnow 1. blueprint problem: perpetual

Inventory Systems and Costing Methods

Inventory systems and inventory costing methods must be understood for proper inventory valuation and measurement. The two basic systems of accounting for merchandise inventory are the perpetual inventory system and the periodic inventory system. Under the perpetual inventory system, continuous records are kept of the quantity and, usually, the cost of individual items as they are bought and sold. Under the periodic inventory system, the inventory not yet sold, or on hand, is counted periodically. This physical count is usually taken at the end of the accounting period.

What type of inventory tracking system is in use when changes in inventory are immediately displayed on the balance sheet?

“Goods Flow” versus “Cost Flow”

The term “goods flow” refers to the PHYSICAL MOVEMENT of inventory through the operations of the business. In most business, we try to sell our oldest merchandise first. The term “cost flow” refers to the COST associated with the assumed flow of merchandise (i.e. how much of the cost is allocated to to the items sold and how much is allocated to the unsold ending inventory). An accounting issue arises when identical units of merchandise are acquired at different unit costs during a period. In such cases, when an item is sold, it is necessary to determine its cost using a cost flow assumption and related inventory costing method. Does the “cost flow” method need to be the same as as the physical “goods flow”?   _________________  

Different valuation methods produce significantly different values for cost of merchandise sold and subsequent inventory levels. This means that the choice of inventory valuation method can have a significant effect on a company’s financial position.

Although the implications are far reaching, the two items most directly and immediately affected by the choice of inventory valuation method are cost of merchandise sold on the   _________________   and inventory on the   _________________   .

The following formula illustrates the relationship between the cost of merchandise sold and the ending inventory. The part of the cost of merchandise available for sale is allocated to the cost of merchandise sold for the inventory that is sold and the value of the unsold inventory is assigned to the ending inventory. Therefore, a change in the amount of the cost of merchandise will impact the value of the ending inventory.

  Beginning inventory
+ Purchases
= Cost of merchandise available for sale
Cost of merchandise sold
= Ending Inventory

How would an inventory valuation method that results in higher cost of merchandise sold for the current period affect the following items?

 1. Ending Inventory   _________________  
 2. Revenue   _________________  
 3. Net Income   _________________  
 4. Total Expenses   _________________  

Calculate the price of your order

550 words
We'll send you the first draft for approval by September 11, 2018 at 10:52 AM
Total price:
The price is based on these factors:
Academic level
Number of pages
Basic features
  • Free title page and bibliography
  • Unlimited revisions
  • Plagiarism-free guarantee
  • Money-back guarantee
  • 24/7 support
On-demand options
  • Writer’s samples
  • Part-by-part delivery
  • Overnight delivery
  • Copies of used sources
  • Expert Proofreading
Paper format
  • 275 words per page
  • 12 pt Arial/Times New Roman
  • Double line spacing
  • Any citation style (APA, MLA, Chicago/Turabian, Harvard)

Our guarantees

Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.

Money-back guarantee

You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.

Read more

Zero-plagiarism guarantee

Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.

Read more

Free-revision policy

Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.

Read more

Privacy policy

Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.

Read more

Fair-cooperation guarantee

By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.

Read more

Order your essay today and save 20% with the discount code RESEARCH