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Acctg 230 Ch 6

Terms in this set (20)

The company reports the. cost of inventory sold as ___ ___ _____ ____
cost of goods sold
Cost of good sold is classified as what and where?
Cost of good sold is an expense reported in the income statement
categories for inventory for a manufacturing company
raw materials, work in process, finished goods
Raw Materials Inventory
includes the cost of components that will become part of the finished product but have not yet been used in production
work in process inventory
refers to the products. that have been started in the production process but are not yet complete at the end of the period. The total costs include raw materials, direct labor, and indirect manufacturing costs called overhead
finished goods inventory
consists of items for which the manufacturing process is complete
merchandising companies
may assemble, sort, repackage, redistribute, store, refrigerate, deliver or install the inventory but they don't manufacture it
merchandising companies typically hold their inventories in?
a single category called inventory
ending inventory
inventory not sold. Reported as an asset in the balance sheet
gross profit equation
gross profit = net revenues - cost of goods sold

gross profit is the first level of profit shown in the multiple-step income statement + provides a key measure of profitability for the company's primary business activities
Multiple-step income statement format
1. Gross profit = net income - cost of goods sold
2. Operating expenses= gross profit - operating expenses
3. Income before income Taxes = operating income + non operating revenues - non operating expenses
4. net income = all revenues - all expenses
Operating Income Equation
gross profit - operating expenses
operating income and non operating revenues and expenses yield ____
income before income taxes
A company subtracts ________ to find its bottom line net income
income tax expense
Four methods for inventory costing
1. specific identification
2. first in, first out (FIFO)
3.Last in, first out (LIFO)
4. Weighted average cost
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