Inventory. Chapter 5. Merch. Merchandise Inventory Only account on both balance sheet and income statement Usually the largest current asset account Income Statement Beginning and end used to get cost of merch sold Balance Sheet Counted as an asset. Inventory Systems.
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To Balance Sheet
Effects of Misstatement
First In … First OUT
Latest Items Left Over
Oldest Items Left
Last In First OUT
GAFSCost Ratio: $120,000 / $200,000 =60%
Deduct retail sales
Retail Ending Inv.
Apply cost ratio 58,000 x 60% =
At CostAt Retail
1. Gross profit is estimated by multiplying net sales by gross profit percentage. $250,000 x .39 = $97,000
2. Cost of merchandise sold determined by estimated gross profit from net sales $250,000 – 97,000 = 152,500
3. Ending inventory difference between GAFS and COGS $199,000 – 152,000 = 46,500
Average Merch Inv. 148,900 / 2 = $74,450
AvgMerchInv74,450 = 2.95 times a year