Ch. 5 - InventoryWorksheetSee all chapters
All Chapters
Ch. 1 - Introduction to Accounting
Ch. 2 - Transaction Analysis
Ch. 3 - Accrual Accounting Concepts
Ch. 4 - Merchandising Operations
Ch. 5 - Inventory
Ch. 6 - Internal Controls and Reporting Cash
Ch. 7 - Receivables and Investments
Ch. 8 - Long Lived Assets
Ch. 9 - Current Liabilities
Ch. 10 - Time Value of Money
Ch. 11 - Long Term Liabilities
Ch. 12 - Stockholders' Equity
Ch. 13 - Statement of Cash Flows
Ch. 14 - Financial Statement Analysis
Ch. 15 - GAAP vs IFRS
Sections
Merchandising Company vs. Manufacturing Company
Physical Inventory Count, Ownership of Goods, and Consigned Goods
Specific Identification
Periodic Inventory - FIFO, LIFO, and Average Cost
Perpetual Inventory - FIFO, LIFO, and Average Cost
Financial Statement Effects of Inventory Costing Methods
Lower of Cost or Market
Inventory Errors
LearnAdditional Practice
What happens if we make a mistake when counting the inventory at the end of the period? The results may AMAZE you...

Concept #1: Inventory Errors

Practice: A company had an ending inventory that was overstated by $5,000 due to a miscount during the year-end inventory count. The amounts reflected in the end of the period balance sheet are:

Practice: A company had a beginning inventory that was understated by $4,000 because the ending inventory in the previous period was understated by $4,000. The amounts reflected in the current end of period balance sheet are:

Previous SectionLower of Cost or Market
Additional Problems
Wilmington Company reported pretax income amounts of: 2007, $25,000; and 2008, $30,000. Later it was discovered that the ending inventory for 2007 was understated by $2,000 (and not corrected in 2008). The correct pretax income for each year was: a. 2007 - $23,000; 2008 - $32,000. b. 2007 - $27,000; 2008 - $32,000. c. 2007 - $27,000; 2008 - $28,000. d. 2007 - $23,000; 2008 - $28,000. e. None of the above is correct.
An understatement of the ending inventory in Year 1, if not corrected, will cause a. Year 1 net income to be understated and Year 2 net income to be overstated. b. Year 1 net income to be overstated and Year 2 net income to be overstated. c. Year 1 net income to be overstated and Year 2 net income will be correct. d. Year 1 net income to be overstated and Year 2 net income to be understated.
Inventory at the end of the current period was understated because one bin of inventory was not counted or included in the ending inventory totals. Because of this error: a. Net income for the period was overstated. b. Net income for the following period will be overstated. c. The cost of goods sold for the current period was understated. d. Total equity for the current year is overstated.
Consider the following: Which line of the schedule above is CORRECT? a. Line A b.  Line B c.  Line C d. Line D