CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-1 The Nature of Merchandise Inventory Flow of inventory costs Effects of errors in costing an inventory Costing and counting the inventory Stock record for a perpetual inventory system Inventory record used for the periodic inventory

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 6 Objectives Inventory Planning and Valuation After studying Chapter 6, you will be able to: Define accounting terms related to planning and costing inventory. Identify accounting concepts and practices related to planning, counting, and costing inventory. Describe the nature of merchandise inventory. Determine the cost of merchandise inventory using selected costing methods. Estimate the cost of merchandise inventory using selected estimating methods. Calculate merchandise inventory turnover ratio and average number of days’ sales in merchandise inventory. 2 LESSON 6-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Lesson 6-1 consignment: goods that are given to a business to sell but for which title remains with the vendor consignee: the person or business that receives goods on consignment consignor: the person or business that gives goods on consignment stock record: a form used to show the type of merchandise, quantity received, quantity sold, and balance on hand 3 LESSON 6-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Lesson 6-1 stock ledger: a file of stock records for all merchandise on hand purchase order: a completed form authorizing a seller to deliver goods with payment to be made later inventory record: a form used during a periodic inventory to record information about each item of merchandise on hand 4 LESSON 6-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 6-1 Cost of Merchandise Available for Sale Beginning Merchandise Inventory Net Purchases Ending Merchandise Inventory Cost of Merchandise Sold FLOW OF INVENTORY COSTS page 171

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 6-1 EFFECTS OF ERRORS IN COSTING AN INVENTORY page 171

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON Enter all purchase transactions. 3.Record all sales transactions. STOCK RECORD FOR A PERPETUAL INVENTORY SYSTEM page Record the description information. 2.Write the beginning quantity. 3 2

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON Enter inventory date and item description. 2.Record stock numbers and descriptions. 3.Write the number of units on hand. 4.Record the unit price. 5.Calculate and record the total item cost. 6.Total the column. INVENTORY RECORD USED FOR THE PERIODIC INVENTORY page

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 6-1 DEFINE TERMS REVIEW In Quizlet consignment consignee consignor stock record stock ledger purchase order inventory record page 175 Create: Chapter 6 AdvAcc (then SAVE)

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Exit Ticket for today: Audit Your Understanding What two elements are included in the cost of merchandise available for sale? 2.If ending merchandise inventory is understated, will the net income be overstated or understated? 3.Name two ways to determine the number of inventory items on hand. 10 LESSON 6-1 In a Word Document, SaveAS: Chapter6-1AYUYourName And drop in my Inbox today!

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Complete the following assignments for Chapter 6-1 today Define Terms Review on page 175. Answer Audit Your Understanding questions on page 124. Complete Work Together 6-1 on Aplia – page 175. Complete On Your Own 6-1 on Aplia – page 175. Complete Application Problem 6-1 on Aplia – page LESSON 6-1