LESSON 6-3 Estimating the Inventory

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CENTURY 21 ACCOUNTING © Thomson/South-Western LESSON 6-3 Estimating the Inventory.

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Presentation transcript:

LESSON 6-3 Estimating the Inventory 11/14/2018 LESSON 6-3 Estimating the Inventory RED

GROSS PROFIT METHOD OF ESTIMATING INVENTORY LESSON 6-3 11/14/2018 GROSS PROFIT METHOD OF ESTIMATING INVENTORY page 182 1 2 3 4 5 6 7 1. Write beginning inventory amount. 5. Estimate gross profit. 2. Determine net purchases. 6. Calculate estimated cost of merchandise sold. 3. Calculate merchandise available for sale. 7. Determine estimated ending inventory. 4. Enter net sales. LESSON 6-3 RED

RETAIL METHOD OF ESTIMATING INVENTORY LESSON 6-3 11/14/2018 RETAIL METHOD OF ESTIMATING INVENTORY page 183 1 2 3 4 5 6 1. Enter beginning inventory at cost and retail. 4. Write net sales. 5. Calculate estimated ending inventory at retail. 2. Add net purchases at cost and retail. 6. Determine estimated ending inventory cost. 3. Calculate merchandise available for sale at cost and retail. LESSON 6-3 RED

MERCHANDISE INVENTORY TURNOVER page 184 Average Merchandise Inventory = 2 ÷ December 31 Merchandise Inventory + January 1 Merchandise Inventory ($168,365.00 + $173,325.00) ÷ 2 = $170,845.00 Cost of Merchandise Sold + Average Merchandise Inventory = Merchandise Inventory Turnover Ratio $925,368.00 + $170,845.00 = 5.4 times LESSON 6-3

AVERAGE NUMBER OF DAYS’ SALES IN MERCHANDISE INVENTORY page 184 Average Number of Days’ Sales in Merchandise Inventory = Merchandise Inventory Turnover Ratio ÷ Days in Year 365 ÷ 5.4 = 68 days LESSON 6-3

TERMS REVIEW retail method of estimating inventory page 185 retail method of estimating inventory merchandise inventory turnover ratio average number of days’ sales in merchandise inventory LESSON 6-3