COGS (Debit/Expense) = Beginning Inventory + Purchases - Ending Inventory

COGAFS (Assets) = Beginning Inventory + Purchases

For the Total Capitalized Cost, all costs are included (getting the equipment and getting it ready for use) -Ex: Sales Tax, Installation, Shipping & Transportation

A Multi-Step Income Statement reports multiple levels of profitability, such as gross profit, operating income, and income before taxes

Weighted Average Cost Per Unit = Total Cost/# of Units

To calculate interest revenue:

-Take the total $ 

-Multiply by the % note receivable 

-Divide by 12 (12 months total)

-Multiply by the number of months that have passed

Allowance for Uncollectible Accounts is a Contra-Asset Account (Credit)

Actual bad debt expense (Debit) = write offs

• Ending Allowance for Uncollectible Accounts - Prior balance of AUA

Gains are a Credit account

With write-offs, Accounts Receivable are ALWAYS debited while AUA are ALWAYS credited

-A debit balance in the AUA BEFORE adjustment indicates that last year's estimate of uncollectible accounts was too low.

Operating Income = Net Sales - Any Selling, General, & Administrive Expenses, and Cost of Goods Sold

Gross Profit = Sales Revenue- Costs of Goods Sold - Sales Returns

Depreciable Cost = Assets' Cost - Residual Value

Depreciation Expense = Depreciable Cost/Service Life

Straight-Line Rate = 1/Service Life

Double-Declining Depreciation Rate = 2/Estimated Service Life

Average Depreciation Unit Rate = # of Units Expected to be Produced/Depreciable Cost Activity-Based Depreciation = (Depreciable Cost/Total Units of Activity) * Units of Activity in Current Year

Book Value = Original Purchase Price - Total Depreciation

Gain/Loss = Sale Price - Book Value

Key Facts:

A perpetual inventory system measures Cost of Goods Sold by adjusting the Inventory account

The Perpetual System maintains a continual record of inventory transactions, whereas the Periodic System records these transactions only at the end of the period.

During periods of rising costs, FIFO generally results in a higher ending inventory balance.

Companies can choose which inventory cost method they prefer, even if the method does not match the actual physical flow of goods

Once a company chooses an inventory cost method, it is not allowed to frequently change to another one.

For FOB destination, title transfers once the inventory reaches the buyer (destination).

CH.8 NOTES

Current Ratio: Measure of liquidity (ability to meet short term obligations)

Current Assets/Current Liabilities =