Monday, February 15th, 1999
Announcements: none

Lecture notes:

1. Merchandise Inventory is all goods owned and held for sale. The primary objective of measuring it is to determine how much money was made.
2. Inventory for a manufacturing company consists of all the goods they need to make the products instead of only finished goods.

4. Invoice price, less discounts, + freight in, + taxes and tariffs
5. Yes, it is still inventory and has not yet been used.

7. No

9. If prices are rising, FIFO will show higher Net Income and LIFO will reduce taxes to be paid.

12. No, they must choose one and use it so they can't gain unfair advantage if prices rise or fall.

18. To estimate sales internally when inventory can't be measured directly (theft, loss, fire).

3.

Ending Inventory
60 at $11 =	660
50 at $12 =	600
	$1,260

Cost of Goods Sold
CGAS =	2,740
- End Inv.	- 1,260
COGS	$1,480

4.

Average Cost = 2,740 / 250 = $10.96

Ending Inventory = $1,205.60

Cost of Goods Sold = $1,534.40

5.

Cost of Goods Sold
80 at $10 =	800
60 at $11 =	660
	$1,460

Ending Inventory = $1,280

6.

Cost of Goods Sold
70 at $12 =	840
70 at $11 =	770
	$1,610

Ending Inventory = $1,130

11.

TC	MV	LCM
6,720	5,600	5,600
5,320	5,510	5,320
2,720	2,800	2,720
14,760	13,910	13,640
	Major Category	Item-By-Item

4. Answer is in the packet.

9.

1) d	4) c	7) c	10) a
2) a	5) d	8) d
3) a	6) c	9) b

10.

Net Income for 19X3 = $30,000

Net Income for 19X4 = $12,000

No effect in 19X5.

13.

Net Sales	450,000
- Cost of Goods Sold	- 270,000
Gross Profit	180,000

Beginning Inventory	45,000
+ Purchases	+ 280,000
+ Freight In	+ 13,700
Cost of Goods Avail for Sale	338,700
- Ending Inventory	- 68,700
Cost of Goods Sold	270,000

1. Liabilities are legal obligations for the future payment of assets or the future performance of services that result from past transactions.

5. Liabilities are current if they are expected to be satisfied within one year or within the normal operating cycle, whichever is longer.

9. It is within the next year and is to be paid from current assets.

16. When the firm places a warranty or guarantee on its product at the time of sale.
17. A contingent liability is a potential liability arising out of a past transaction whereas estimated liabilities exist but the amount is unknown.
18. Revenues, professional liability risks, interest rate agreements, income taxes, and litigation are examples because you can't be sure how much they'll be.

1.

1) c

2) b

3) d

4) a

2.

1) a

2) c

3) b

4) a

5) b

6) c

3.

8/31	Cash			60,000
			Notes Payable		60,000
10/31	Notes Payable			60,000
	Interest Expense			1,000
		Cash			61,000

4.

8/31	Cash			59,000
	Discount on Notes Payable			1,000
			Notes Payable		60,000
10/30	Notes Payable			60,000
		Cash			60,000
	Interest Expense			1,000
		Discount on Notes Payable			1,000