inventories

• FAS(free alongside)- seller assumes all expenses in delivering goods to the dock; buyer assumes loading and shipping cost
• ex-ship: seller assumes all expenses until the goods are unloaded from the carrier
• CIF and CF: buyer pays in a lump sum
• FOB SP, Freight Prepaid: increases the accounts payable
• FOB destination, freight collect: decrease in accounts payable
• under consignment arrangement, consignor retains the inventory
• in consignment, it is only recorded through memo entries; freight and other incidental cost form part of the cost of goods consigned
• commissions are expense for consignor and income for the consignee
• commissions do not affect the cost of consigned goods--advanced commission to consignee is a receivable
• product financing agreement: seller sells inventory but buyer assumes an obligation to repurchase it; seller retains ownership
• pledge of inventory: borrower uses inventory as collateral; borrower retains ownership
• loan of inventory: entity borrows inventory from another and to be replaced with the same kind; borrower includes the loaned goods on its inventory
• under sale on trial, seller allows a prospective customer to use a good for a given period of time
• in sale wit unusual return, buyer includes the inventory except when unsalable
• an installment sale where the possession of goods is transferred to the buyer but the seller retains legal title solely to protect the collectability of the amount due is considered a regular sale; buyer's inventory
• bill and hold arrangement: contract where seller bills a customer but retains physical possession of the goods until it is transferred; included in buyer's inventory upon billing
• lay away sale in which goods are delivered only when the buyer makes the final payment in a series of installments; seller's inventory
• inventories are presented in a single line item captioned "inventories" and the breakdown is disclosed in the notes
• perpetual: inventory account is updated each time a purchase or sale is made; stock cards are maintained
• under perpetual: COGS is updated each time a sale or sale return is made and inventory on increase and decrease of purchases, freight in, purchase returns, COGS and sales return
• in periodic, inventory is updated only when a physical count is performed; does not maintain records
• beginning inventory + net purchases = total goods available for sale - ending inventory(physical count x unit) = COGS
• under periodic, no enrty is made to record COGS
• purchases + freight in - purchase return - purchase discount = net purchases
• COGS beginning - sales return = ending balance of COGS
• perpetual: difference between balance per count and balance per records is shortage or overage
• inventory shortage is charged to COGS if normal; if abnormal-loss
• in perpetual, it does not require the use of any formula to determine the COGS
• ending inventory: profit and beginning inventory & purrchases and COGS = direct relationship
• ending inventory : COGs and beginning inventory & purchases: profit = inverse relationship
• the relationships are only applicable on periodic
• measurement of inventory is the lower of cost and NRV
• purchase cost includes purchase price, import duties, non-refundable taxes, transport and handling
• excluded from cost of inventories are: Abnormal amounts; Selling costs, Administrative overheads and Storage cost
• purchase discount loss are treated as other expenses
• net method supports the concept of conservatism, historical cost and matching but gross method is more commonly used because of cost-benefit considerations and convenience
• variable production overhead are indirect cost
• fixed production overhead remains constant regardless of the volume of production such as depreciation and maintenance
• fixed production overheads are allocated to the cost of conversion based on the normal capacity
• variable production overhead are allocated to eac unit of production based on the actual use of production facilities