1. Chapter 14: Merchandise Inventory

2. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-2 Merchandise Inventory Merchandise inventory includes all goods owned by the business and held for sale. The account used for Joel's Sales & Service’s merchandise inventory is Account No. 12000, Merchandise Inventory. Peachtree uses a perpetual inventory system. Inventory calculations include FIFO (first in, first out), LIFO (last in, first out), and average cost methods. Peachtree tracks the inventory items you buy and sell. After you post, Peachtree automatically updates the cost and quantity of each inventory item.

3. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-3 Software Objectives, p. 529 Enter inventory maintenance and default information. Enter inventory item information, including Sales account, Merchandise Inventory account, and Cost of Sales account. Enter item codes when recording purchases and sales. Enter inventory adjustments. Complete the accounting period for Joel's Sales & Service and print reports. Make three backups: 2 for Joel's Sales & Service; 1 for the end-of-chapter exercise.

4. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-4 Web Objectives, p. 529 Use your Internet browser to go to the book’s website at www.mhhe.com/business/accounting/yacht2002 www.mhhe.com/business/accounting/yacht2002 Go to the Internet Activity link on the book’s website. Then, select WEB EXERCISES PART 3. Complete the fourth web exercise in Part 3, “Accountant’s World.” Use a word processing program to write summaries of the websites that you visited.

5. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-5 The journal entry for purchasing four pairs of curtains from Ronald Becker Fabrics at $30 each, p. 531 Account IDAccount DescriptionDebitCredit 12000Merchandise Inventory120.00 20000/ RBF08 Accounts Payable/ Ronald Becker Fabrics120.00

6. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-6 The journal entry for selling three pairs of curtains to Philip Merchant at $100 each, p. 531 Account IDAccount DescriptionDebitCredit 50500Cost of Goods Sold-Walls90.00 11000/pm005Accounts Receivable/ Philip Merchant324.00 12000Merchandise Inventory90.00 40400Sales-Walls300.00 23100Sales Tax Payable24.00

7. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-7 Peachtree Tips Chapters 11, 12, and 13 must be completed before starting Chapter 14. In Chapters 11-14, Peachtree uses the average inventory method.

8. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-8 Backing Up Chapter 14 DiskBackup NameKBPage Nos. 18 of 18A:\Chapter 14 Begin147 KB540 A:\Chapter 14162 KB565 A:\Exercise 14-1145 KB570 TOTAL KB454 KB.

9. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-9 Chapter 14 Topics 1. Software & web objectives, p. 529 2. Cost methods, p. 530 a. Average cost, p. 531 b. LIFO (Last in, First Out), p. 532 c. FIFO (First in, First Out), p. 532 3. Types of Inventory Items, pp. 532-533 4. Getting Started, pp. 533-535 5. Entering inventory item maintenance information, pp. 536-537 6. Inventory adjustments, pp. 538-540 7. Backing up your data, p. 540

10. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-10 Chapter 14 Topics, concluded 8. Completing the accounting period for Joel's Sales & Service, pp. 541-551 9. Printing Reports, pp. 552-564 10. Backing up Chapter 14 data, p. 565 11. Internet activity, p. 566 12. Summary and review, pp. 566-567 a. Going to the net, p. 567 b. Short-answer questions, pp. 567-569 b. Exercise 14-1, pp. 569-570 c. Exercise 14-2, p. 570 d. Chapter 14 index, p. 571

11. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-11 Getting started, pp. 533 and 534 Complete steps 1 – 2i on pages 533 and 534. Click on Maintain, Default Information, then Inventory Items. Read the information at the bottom of page 534.

12. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-12 “Taxes/Shipping” folder tab, p. 535 Complete step 4 on p. 535 by clicking on the “Taxes/Shipping” folder tab. Read the information below the screen illustration on p. 535. Then, click on to close the window and return to the menu bar.

13. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-13 Entering inventory item maintenance information, pp. 536 and 537 Read the information on page 536. Then, complete steps 1 – 4 on pp. 536 and 537.

14. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-14 Inventory Adjustments, p. 538 Read the information on p. 538. Then, click on Tasks, Purchases/Receive Inventory. Record the January 15, 2002, transaction. Post and close the “Purchases/Receive Inventory” window.

15. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-15 Inventory Adjustments, pp. 539-540 Read the transaction on p. 539. Then, complete steps 1-6 on page 539. Complete steps 7 and 8 on p. 540. Click on the “Sales Defaults” folder tab.

16. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-16 Backing up your data, p. 540 Complete steps 1 – 9 on page 540 to back up your data. Use “Chapter 14 Begin” as the back up name.

17. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-17 Completing the accounting period for Joel's Sales & Service, p. 541-551 Read the transactions on pages 541 – 551. Compare your printouts with the ones shown on pages 541-551. Complete the January 31, 2002 transaction on p. 551.

18. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-18 Printing reports, pp. 552-564 Complete steps 1 – 12 on pages 552 – 564. Compare your reports with the ones shown on pages 551-564.

19. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-19 Backing Up Chapter 14 Data, p. 565 Complete steps 1 - 9 on page 565. The back up name is “Chapter 14.” Click on. Compare your check to the one shown on p. 381. Record the additional payments shown on p. 382.

20. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-20 Glossary of Terms Chapter 14

21. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-21 Merchandise inventory, p. 529 Merchandise inventory includes all goods owned by the business and held for sale. The account used for Joel's Sales & Service’s merchandise inventory is Account No. 12000, Merchandise Inventory.

22. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-22 Merchandising business, p. 529 Retail stores that resell goods and/or perform services.

23. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-23 FIFO, p. 530 The FIFO (first in, first out) inventory method assumes that the items in the beginning inventory are sold first.

24. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-24 LIFO, p. 530 The LIFO (last in, first out) inventory method assumes that the goods received last are sold first.

25. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-25 Internet Activity, p. 566 1Go to the book’s website at www.mhhe.com/business/accounting/yacht2002 www.mhhe.com/business/accounting/yacht2002 2In the “Student Center” list, link to Internet Activities. 3Link to WEB EXERCISES PART 3. 4Complete the “ACCOUNTANT’S WORLD” exercise. Read steps 1 and 2. 5Follow the steps shown on the book’s website to complete this Internet activity. 6Using a word processing program, write a brief summary of what you find. Include all appropriate website addresses.

26. McGraw-Hill/Irwin © The McGraw-Hill Companies, Inc., 2003 14-26 Going to the Net, p. 567 Access the Small Business Knowledge Base website at www.bizmove.com/finance/m3d3.htm www.bizmove.com/finance/m3d3.htm Scroll down the screen to “Merchandise Inventories: Perpetual Inventory.” 1. What is a perpetual inventory at retail? 2. When is a physical count of inventory necessary?