Chapter 6 Inventories 高立翰

Transcription

1 Chapter 6 Inventories 高立翰

2 Preview of Chapter 6 會計學 ( 一 ) 2

3 Study Objectives 1. Describe the steps in determining inventory quantities. 2. Explain the accounting for inventories and apply the inventory cost flow methods. 3. Explain the financial effects of the inventory cost flow assumptions. 4. Explain the lower-of-cost-or-net realizable value basis of accounting for inventories. 5. Indicate the effects of inventory errors on the financial statements. 6. Compute and interpret the inventory turnover ratio. 會計學 ( 一 ) 3

4 Classifying Inventory Merchandising Company One Classification: Merchandise Inventory Manufacturing Company Three Classifications: Raw Materials ( 原料 ) Work in Process ( 在製品 ) Finished Goods ( 製成品 ) Regardless of the classification, companies report all inventories under Current Assets on the statement of financial position. 會計學 ( 一 ) 4

5 Determining Inventory Quantities (1/5) Physical Inventory taken for two reasons: Perpetual System Check accuracy of inventory records. ( 確認存貨記錄的正確性 ) Determine amount of inventory lost (wasted raw materials, shoplifting, or employee theft). Periodic System Determine the inventory on hand. ( 確認期末存貨數量 ) Determine the cost of goods sold for the period. ( 確認銷貨成本金額 ) 會計學 ( 一 ) 5

6 Determining Inventory Quantities (2/5) Taking a Physical Inventory Involves counting, weighing, or measuring each kind of inventory on hand. Companies often take inventory when the business is closed or when business is slow. ( 清算或辨認營運狀況 ) at end of the accounting period. ( 期末盤點 ) 會計學 ( 一 ) 6

7 Determining Inventory Quantities (3/5) Determining Ownership of Goods Goods in Transit ( 在途存貨 ) Purchased goods not yet received. Sold goods not yet delivered. Goods in transit should be included in the inventory of the company that has legal title to the goods. Legal title is determined by the terms of sale. 會計學 ( 一 ) 7

8 Determining Inventory Quantities (4/5) Goods in Transit Ownership of the goods passes to the buyer when the public carrier accepts the goods from the seller. ( 起運點交貨 ) Ownership of the goods remains with the seller until the goods reach the buyer. ( 目的地交貨 ) Q6 1. 會計學 ( 一 ) 8

9 Determining Inventory Quantities (5/5) Determining Ownership of Goods Consigned Goods ( 寄銷品 ) In some lines of business, it is common to hold the goods of other parties and try to sell the goods for them for a fee, but without taking ownership of goods. These are called consigned goods. 會計學 ( 一 ) 9

10 Inventory Costing Cost includes all expenditures necessary to acquire goods and place them in a condition ready for sale. ( 達到可供銷貨的狀態所需的一切支出 ) Unit costs can be applied to quantities on hand using the following costing methods: Specific Identification ( 個別認定法 ) First-in, first-out (FIFO) ( 先進先出法 ) Average-cost ( 平均成本法 ) Cost Flow Assumptions ( 成本流動假設 ) 會計學 ( 一 ) 10

11 Inventory Costing Illustration Crivitz TV Company purchases three identical 50-inch TVs on different dates at costs of 700, 750, and 800. During the year Crivitz sold two sets at 1,200 each. These facts are summarized below. Illustration 6-3 Data for inventory costing example 會計學 ( 一 ) 11

12 Specific Identification Method An actual physical flow costing method in which items still in inventory are specifically costed to arrive at the total cost of the ending inventory. ( 稀有或貴重的商品才會採用 ) Practice is relatively rare. Most companies make assumptions (Cost Flow Assumptions) about which units were sold. 會計學 ( 一 ) 12

13 Illustrations Illustration (1): Assume that Crivitz TV Company purchases three identical 46-inch TVs on different dates at costs of $700, $750, and $800. During the year Crivitz sold two sets at $1,200 each. Illustration 6-3 Illustration (2): If Crivitz sold the TVs it purchased on February 3 and May 22, then its cost of goods sold is $1,500 ($700 $800), and its ending inventory is $750 Illustration 6-4 會計學 ( 一 ) 13

14 Cost Flow Assumptions There are two assumed cost flow methods: First-in, first-out (FIFO) Average-cost Cost flow does not need be consistent with the physical movement of the goods. Data for Lin Electronics Astro condensers Q6 2. (Beginning Inventory + Purchases) - Ending Inventory = Cost of Goods Sold 期初存貨 + 本期進貨 +( 運費 - 進貨退回與折讓 - 進貨折扣 )- 期末存貨 = 銷貨成本 會計學 ( 一 ) 14

15 First-In-First-Out (FIFO) (1/2) First-In-First-Out (FIFO) ( 先進先出法 ) Costs of the earliest goods purchased are the first to be recognized in determining cost of goods sold. Often parallels actual physical flow of merchandise. Companies obtain the cost of the ending inventory by taking the unit cost of the most recent purchase and working backward until all units of inventory have been costed. ( 從最後進貨的項目往前推算存貨價值 ) Illustration 6-6 會計學 ( 一 ) 15

16 First-In-First-Out (FIFO) (2/2) HELPFUL HINT Another way of thinking about the calculation of FIFO ending inventory is the LISH assumption last in still here. 會計學 ( 一 ) 16

17 先進先出法釋例 Periodic Inventory System 12/31 盤點後, 剩餘 950 個 12/1 買進 1,000 12/8 賣出 1,000 2,250 個商品可供銷售 12/10 買進 /20 買進 750 剩 950 個商品可供銷售 12/19 賣出 /10 買進的剩 /20 買進的剩 750 Cost of goods available for sale: 1,000*$15+500*$17+750*$18=$37,000 Cost of goods sold: 1,000*$15+300*$17=$20,100 Ending Inventory: 200*$17+750*$18=$16,900 會計學 ( 一 ) 17

18 Average-Cost (1/2) Average-Cost ( 平均成本法 ) Allocates cost of goods available for sale on the basis of weighted average unit cost incurred. Assumes goods are similar in nature.( 產品性質相似 ) Applies weighted average unit cost to the units on hand to determine cost of the ending inventory. Illustration 6-9 會計學 ( 一 ) 18

19 Average-Cost (2/2) 1. 計算每單位平均成本 2. 盤點期末存貨 3. 計算銷貨成本 會計學 ( 一 ) 19

20 Choice of Cost Flow Methods Either of the two cost flow assumptions is acceptable for use. For example, adidas (DEU) and Lenovo (CHN) use the averagecost method, whereas Syngenta Group (CHE) and Nokia (FIN) use FIFO. A recent survey of IFRS companies, approximately 60% use the average-cost method, 40% use FIFO, and 23% use both for different parts of their inventory. 會計學 ( 一 ) 20

21 Financial Statement and Tax Effects (1/2) Income Statement Effects ( 假設物價成長的情況 ) Illustration 6-10 會計學 ( 一 ) 21

22 Financial Statement and Tax Effects (2/2) Statement of Financial Position Effects A major advantage of the FIFO method is that in a period of inflation, the costs allocated to ending inventory will approximate their current cost. A shortcoming of the average-cost method is that in a period of inflation, the costs allocated to ending inventory may be understated in terms of current cost. Tax Effects In a period of inflation: FIFO - inventory and net income higher. AVERAGE Cost - lower income taxes. Using Cost Flow Methods Consistently Method should be used consistently, enhances comparability. Although consistency is preferred, a company may change its inventory costing method. Q6 3. 會計學 ( 一 ) 22

23 Ending Inventory: FIFO vs. Average Cost 12/1 買進 1,000 12/8 賣出 1,000 2,250 個商品可供銷售 12/10 買進 /20 買進 750 剩 950 個商品可供銷售 12/19 賣出 /10 買進的剩 /20 買進的剩 750 Cost of goods available for sale: 1,000*$15+500*$17+750*$18=$37,000 Average cost per unit: $37,000 / 2,250 = $16.44 FIFO 下的期末存貨成本 ( 價值 ): 200*$17+750*$18 = $16,900 Average Cost 下的期末存貨成本 ( 價值 ): 950*$16.44 = $15,618 會計學 ( 一 ) 23

24 Lower-of-Cost-or-Net Realizable Value Lower-of-Cost-or-Net Realizable Value ( 成本與淨變現價值孰低 ) When the value of inventory is lower than its cost Companies can write down ( 減值 ) the inventory to its net realizable value in the period in which the price decline occurs. Net realizable value refers to the net amount that a company expects to realize (receive) from the sale of inventory. Illustration Assume that Gao TV has the following lines of merchandise with costs and market values as indicated. Illustration 6-11 會計學 ( 一 ) 24

25 Common Causes: Inventory Errors (1/5) Failure to count or price inventory correctly. 盤點錯誤 Not properly recognizing the transfer of legal title to goods in transit. 所有權歸屬錯誤 Errors affect both the income statement and statement of financial position. 會計學 ( 一 ) 25

26 Inventory Errors (2/5) Income Statement Effects Inventory errors affect the computation of cost of goods sold and net income. Illustration 6-12 Illustration 6-13 會計學 ( 一 ) 26

27 Inventory Errors (3/5) Income Statement Effects Inventory errors affect the computation of cost of goods sold and net income in two periods. An error in ending inventory of the current period will have a reverse effect on net income of the next accounting period. Over the two years, the total net income is correct because the errors offset each other. The ending inventory depends entirely on the accuracy of taking and costing the inventory. 會計學 ( 一 ) 27

28 Illustration 6-14 Inventory Errors (4/5) Incorrect Correct Incorrect Correct Sales 80,000 80,000 90,000 90,000 Beginning inventory 20,000 20,000 12,000 15,000 Cost of goods purchased 40,000 40,000 68,000 68,000 Cost of goods available 60,000 60,000 80,000 83,000 Ending inventory 12,000 15,000 23,000 23,000 Cost of good sold 48,000 45,000 57,000 60,000 Gross profit 32,000 35,000 33,000 30,000 Operating expenses 10,000 10,000 20,000 20,000 Net income 22,000 25,000 13,000 10,000 Combined income for 2-year period is correct. ($3,000) Net Income understated $3,000 Net Income overstated 會計學 ( 一 ) 28

29 存貨錯誤的釋例 Sales $ 80,000 $ 90,000 Beginning Inventory $ 20,000 $ 12,000 Purchases 40,000 68,000 Ending Inventory 12,000 23,000 Cost of Good Sold 48,000 57,000 Gross Profit 32,000 33,000 Operating Expenses 10,000 20,000 Net Income $ 22,000 $ 13,000 Net Income computed by Incorrect Inventory 22,000 13,000 Net Income computed by correct Inventory 25,000 10,000 Differences (3,000) 3,000 會計學 ( 一 ) 29

30 Inventory Errors (5/5) Statement of Financial Position Effects Effect of inventory errors on the statement of financial position is determined by using the basic accounting equation: Assets = Liabilities + Equity. Errors in the ending inventory have the following effects. Illustration 6-15 Q6 4. 會計學 ( 一 ) 30

31 Statement Presentation and Analysis Presentation Statement of Financial Position - Inventory classified as current asset Income Statement - Cost of goods sold. There also should be disclosure of major inventory classifications, basis of accounting (cost, or lower-of-cost-or-net realizable value), and Cost method (specific identification, FIFO, or average-cost). Analysis Using Inventory Turnover (p.293 不上 ) 會計學 ( 一 ) 31

32 Appx. 6A: Perpetual Systems (1/3) Assuming the Perpetual Inventory System, compute Cost of Goods Sold and Ending Inventory under FIFO and Average cost Illustration 6A-1 會計學 ( 一 ) 32

33 Appx. 6A: Perpetual Systems (2/3) First-In-First-Out (FIFO) Illustration 6A-2 Cost of Goods Sold Ending Inventory 會計學 ( 一 ) 33

34 Appx. 6A: Perpetual Systems (3/3) Average Cost (Moving-Average System) Illustration 6A-3 Cost of Goods Sold 1/1: $1, = $100 4/15: ($1,000+$2,200) 30 = $ /24: ($3,200+$3,600) 60 = $ Ending Inventory Q6 5. 會計學 ( 一 ) 34

35 Appx. 6B: Estimating Inventories (1/4) Gross Profit Method ( 毛利率法 ) The gross profit method estimates the cost of ending inventory by applying a gross profit rate to net sales. Illustration 6B-1 會計學 ( 一 ) 35

36 Appx. 6B: Estimating Inventories (2/4) Illustration Kishwaukee Company s records for January show net sales of $200,000, beginning inventory $40,000, and cost of goods purchased $120,000. The company expects to earn a 30% gross profit rate. Compute the estimated cost of the ending inventory at January 31 under the gross profit method. Illustration 6B-2 會計學 ( 一 ) 36

37 Appx. 6B: Estimating Inventories (3/4) Retail Inventory Method ( 零售價法 ) Company applies the cost-to-retail percentage to ending inventory at retail prices to determine inventory at cost. Illustration 6B-3 會計學 ( 一 ) 37

38 Appx. 6B: Estimating Inventories (4/4) Illustration Illustration 6B-4 Note that it is not necessary to take a physical inventory to determine the estimated cost of goods on hand at any given time 會計學 ( 一 ) 38

39 Appx. 6C: LIFO Inventory Method (1/3) Last-In, First-Out (LIFO) ( 後進先出法 ) Under IFRS, LIFO is not permitted for financial reporting purposes. Assumes latest goods purchased are first to be sold. Seldom coincides with actual physical flow of merchandise, except for goods stored in piles, such as coal or hay. 會計學 ( 一 ) 39

40 Appx. 6C: LIFO Inventory Method (2/3) Last-In-First-Out (LIFO) Illustration 6C-1 會計學 ( 一 ) 40

41 Appx. 6C: LIFO Inventory Method (3/3) Illustration 6C-1 Allocation of costs LIFO method Illustration 6C-2 Proof of COGS 會計學 ( 一 ) 41