Chapter 14: Chapter 14: Merchandise InventoryMerchandise Inventory

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Merchandise InventoryMerchandise Inventory Merchandise inventory includes all goods owned

by the business and held for sale. The account used for Joel's Sales & Service’s merchandise inventory is Account No. 12000, Merchandise Inventory.

Peachtree uses a perpetual inventory system. Inventory calculations include FIFO (first in, first

out), LIFO (last in, first out), and average cost methods.

Peachtree tracks the inventory items you buy and sell. After you post, Peachtree automatically updates the cost and quantity of each inventory item.

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Software Objectives, p. 529Software Objectives, p. 529

Enter inventory maintenance and default information. Enter inventory item information, including Sales

account, Merchandise Inventory account, and Cost of Sales account.

Enter item codes when recording purchases and sales.

Enter inventory adjustments. Complete the accounting period for Joel's Sales &

Service and print reports. Make three backups: 2 for Joel's Sales & Service; 1

for the end-of-chapter exercise.

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Web Objectives, p. 529Web Objectives, p. 529 Use your Internet browser to go to the book’s

website at www.mhhe.com/business/accounting/yacht2002

Go to the Internet Activity link on the book’s website. Then, select WEB EXERCISES PART 3. Complete the fourth web exercise in Part 3, “Accountant’s World.”

Use a word processing program to write summaries of the websites that you visited.

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The journal entry for purchasing four pairs of The journal entry for purchasing four pairs of curtains from Ronald Becker Fabrics at $30 curtains from Ronald Becker Fabrics at $30 each, p. 531each, p. 531

Account ID Account Description Debit Credit

12000 Merchandise Inventory 120.00

20000/

RBF08

Accounts Payable/

Ronald Becker Fabrics 120.00

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The journal entry for selling three pairs of The journal entry for selling three pairs of curtains to Philip Merchant at $100 each, p. 531curtains to Philip Merchant at $100 each, p. 531

Account ID Account Description Debit Credit

50500 Cost of Goods Sold-Walls 90.00

11000/pm005 Accounts Receivable/

Philip Merchant 324.00

12000 Merchandise Inventory 90.00

40400 Sales-Walls 300.00

23100 Sales Tax Payable 24.00

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Peachtree TipsPeachtree Tips

Chapters 11, 12, and 13 must be completed before starting Chapter 14.

In Chapters 11-14, Peachtree uses the average inventory method.

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Backing Up Chapter 14Backing Up Chapter 14

Disk Backup Name

KB Page Nos.

18 of 18 A:\Chapter 14 Begin 147 KB 540

A:\Chapter 14 162 KB 565

A:\Exercise 14-1 145 KB 570

TOTAL KB 454 KB.

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Chapter 14 TopicsChapter 14 Topics1. Software & web objectives, p. 529

2. Cost methods, p. 530

a. Average cost, p. 531

b. LIFO (Last in, First Out), p. 532

c. FIFO (First in, First Out), p. 532

3. Types of Inventory Items, pp. 532-533

4. Getting Started, pp. 533-535

5. Entering inventory item maintenance information, pp. 536-537

6. Inventory adjustments, pp. 538-540

7. Backing up your data, p. 540

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Chapter 14 Topics, concludedChapter 14 Topics, concluded8. Completing the accounting period for Joel's Sales &

Service, pp. 541-5519. Printing Reports, pp. 552-56410. Backing up Chapter 14 data, p. 56511. Internet activity, p. 56612. Summary and review, pp. 566-567

a. Going to the net, p. 567b. Short-answer questions, pp. 567-569b. Exercise 14-1, pp. 569-570c. Exercise 14-2, p. 570

d. Chapter 14 index, p. 571

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Getting started, pp. 533 and 534Getting started, pp. 533 and 534 Complete steps 1 – 2i on pages 533 and 534. Click on Maintain, Default Information, then Inventory Items.

Read the information at the bottom of page 534.

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““Taxes/Shipping” folder tab, p. 535Taxes/Shipping” folder tab, p. 535 Complete step 4 on p. 535 by clicking on the

“Taxes/Shipping” folder tab.

Read the information below the screen illustration on p. 535. Then, click on <OK> to close the window and return to the menu bar.

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Entering inventory item maintenance Entering inventory item maintenance information, pp. 536 and 537information, pp. 536 and 537

Read the information on page 536. Then, complete steps 1 – 4 on pp. 536 and 537.

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Inventory Adjustments, p. 538Inventory Adjustments, p. 538 Read the information on p. 538. Then, click on Tasks,

Purchases/Receive Inventory. Record the January 15, 2002, transaction.

Post and close the “Purchases/Receive Inventory” window.

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Inventory Adjustments, pp. 539-540Inventory Adjustments, pp. 539-540 Read the transaction on p. 539. Then, complete steps 1-6 on page 539.

Complete steps 7 and 8 on p. 540.

Click on the “Sales Defaults” folder tab.

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Backing up your data, p. 540Backing up your data, p. 540

Complete steps 1 – 9 on page 540 to back up your data.

Use “Chapter 14 Begin” as the back up name.

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Completing the accounting period for Completing the accounting period for Joel's Sales & Service, p. 541-551Joel's Sales & Service, p. 541-551

Read the transactions on pages 541 – 551.

Compare your printouts with the ones shown on pages 541-551.

Complete the January 31, 2002 transaction on p. 551.

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Printing reports, pp. 552-564Printing reports, pp. 552-564

Complete steps 1 – 12 on pages 552 – 564.

Compare your reports with the ones shown on pages 551-564.

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Backing Up Chapter 14 Data, p. 565Backing Up Chapter 14 Data, p. 565

Complete steps 1 - 9 on page 565. The back up name is “Chapter 14.”

Click on <Ok>. Compare your check to the one shown on p. 381. Record the additional payments shown on p. 382.

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Glossary of TermsGlossary of TermsChapter 14Chapter 14

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Merchandise inventory, p. 529Merchandise inventory, p. 529

Merchandise inventory includes all goods owned by the business and held for sale.

The account used for Joel's Sales & Service’s merchandise inventory is Account No. 12000, Merchandise Inventory.

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Merchandising business, p. 529Merchandising business, p. 529

Retail stores that resell goods and/or perform services.

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FIFO, p. 530FIFO, p. 530

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. 530LIFO, p. 530

The LIFO (last in, first out) inventory method assumes that the goods received last are sold first.

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Internet Activity, p. 566Internet Activity, p. 5661 Go to the book’s website at

www.mhhe.com/business/accounting/yacht2002

2 In the “Student Center” list, link to Internet Activities.

3 Link to WEB EXERCISES PART 3.

4 Complete the “ACCOUNTANT’S WORLD” exercise. Read steps 1 and 2.

5 Follow the steps shown on the book’s website to complete this Internet activity.

6 Using a word processing program, write a brief summary of what you find. Include all appropriate website addresses.

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Going to the Net, p. 567Going to the Net, p. 567 Access the Small Business

Knowledge Base website at www.bizmove.com/finance/m3d3.htm

Scroll down the screen to “Merchandise Inventories: Perpetual Inventory.”

1. What is a perpetual inventory at retail?2. When is a physical count of inventory

necessary?