Chapter 14:

Inventory & Services

McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.

Inventory & Services

Merchandise inventory includes all goods owned by the business and held for sale. For tracking merchandise inventory, Cynthia’s Service Merchandise uses Account No. 12000, Merchandise Inventory.

Peachtree uses a perpetual inventory system.

In a perpetual inventory system, a merchandising business updates inventory each time an item is purchased or sold.

Inventory calculations include FIFO (first in, first out), LIFO (last in, first out), and average cost methods.

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Peachtree Tips

Chapters 12 and 13 must be

completed before starting Chapter 14.

In Chapters 12-15, Peachtree uses the

average inventory method.

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Backups and Saved Files, p. 427

Backup (.ptb extension)

Excel (.xlsx) and Adobe (.pdf) KB

Page

Nos.

Chapter 14 Begin.ptb 1,091 KB 559

Chapter 14.ptb 1,119 KB 572

Chapter 14_CL_VL_CGSJ_IAJ_IPR_GLTB.xlsx 32 KB 572-573

Exercise 14-1.ptb 993 KB 575

Exercise 14-2_CRJ_PJ_CGSJ_IAJ_IPR_GLTB.xlsx 30 KB 576

Exercise 14-2_Cash Receipts Journal.pdf 7 KB 576

Exercise 14-2_Purchase Journal.pdf 6 KB 576

Exercise 14-2_Cost of Goods Sold Journal.pdf 6 KB 576

Exercise 14-2_Inventory Adjustment Journal.pdf 5 KB 576

Exercise 14-2_Inventory Profitability Report.pdf 6 KB 576

Exercise 14-2_General Ledger Trial Balance.pdf 6 KB 576

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Glossary of Terms

Chapter 14

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Merchandise inventory, p. 549

Merchandise inventory includes all goods

owned by the business and held for

resale.

The inventory account for Cynthia’s

Service Merchandise is Account No.

12000, Merchandise Inventory.

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Merchandising business, p. 549

Retail stores that resell goods and/or

perform services.

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FIFO, p. 549

The FIFO (first in, first out) inventory

method assumes that the items in the

beginning inventory are sold first.

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LIFO, p. 549

The LIFO (last in, first out) inventory

method assumes that the goods received

last are sold first.

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Inventory Adjustment, p. 561

In Chapter 14, you enter an inventory

adjustment for damaged merchandise.

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Going to the Net, p. 573

Access the Small Business Knowledge Base

website at

http://www.bizmove.com/finance/m3d3.htm.

Scroll down the window to Merchandise

Inventories: Perpetual Inventory. Answer

these questions about perpetual inventory.

1. What is a perpetual inventory at retail?

2. When is a physical count of inventory

necessary?

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Analysis Question, p. 576

Which one of Cynthia’s Service Merchandise items

shows the highest gross profit percentage? Why?

The Inventory Profitability Report shows that wall

coverings show the highest gross profit percentage at

70%. The reason is that wall coverings are purchased for

$30 and sold for $100, a 70% profit. (The cost of the item

and sale price of the item is shown on the Maintain

Inventory items window; Item ID, 002wall.)

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Assessment Rubric, p. 577Date Transaction

Navigation

Center/Module

Task

Window

Journal

Dr./Cr.

1/30 Two tool kits purchased from

Carson Phillips Tools on 1/27

were damaged by the owner.

Inventory & Services;

Inventory Adjustments

Inventory

Inventory

Adjustments

Inventory Adjustment Journal

Dr. 50500, Cost of Sales-Tools,

$60

Cr. 12000, Merchandise

Inventory, $60

1/31 Cash sales in the amount of

$4,752, ($4,400 plus $352 sales

taxes) were deposited at Caliber

Bank: 20 tool kits, $1,700; 18

hardware sets, 2,700.

Customers & Sales,

Receive Money,

Receive Money From

Customer

Accounts Receivable

Receipts Cash Receipts Journal

Dr. 50500, Cost of Sales-Tools,

$600

Dr. 50000, Cost of Sales-

Hardware, $900

Dr. 10200, Caliber Bank, $4,752

Cr. 23100, Sales Tax Payable,

$352

Cr. 40200, Sales-Tools, $1,700

Cr. 12000, Merchandise

Inventory, $600

Cr. 40000, Sales-Hardware,

$2,700

Cr. 12000, Merchandise

Inventory, $900

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Online Learning Center

Go online to www.mhhe.com/yacht2012 for additional resources. Link

to Student Edition, select Chapter 14.

o Interactive Testing

o Glossary of Terms

o Feature Quiz

o Narrated PowerPoints

o Assessment Rubric

o Going to the Net

o QA Templates

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