Course Outline: Module 6
Cost of Goods Sold and Inventory
ACC 201 Financial Accounting
The primary goal of this module is: introduce students to Inventory, Inventory Costing and Cost of Good
Sold
Module 6 – Cost of Goods Sold and Inventory
Introduction
Careful management and control of inventory is at the heart of the success of a company that sells and/or
manufactures a product. If inventory levels fall too low and stockouts occur, the company will lose sales
to competitors. If inventory levels are too high, carry costs escalate, along with the risk of obsolescence.
<insert clip art “inventory”>
Learning Objectives
After completing this module, students will be able to:
1. Describe the types of inventories held by merchandisers and manufacturer, and understand how
inventory costs flow through a company.
2. Explain how to record purchases and sales of inventory using a perpetual inventory system.
3. Apply the four inventory costing methods to compute ending inventory and cost of good sold
under a perpetual inventory system.
4. Analyze the financial reporting and tax effects of the various inventory costing methods.
5. Apply the lower of cost or market rule to the valuation of inventory.
6. Evaluate inventory management using the gross profit and inventory turnover ratios.
7. Describe how errors in ending inventory affect income statements and balance sheets.
Due This Week
Assignment
Format
Grading
Interactive Lecture and Quiz
PowerPoint presentation
5 points
Lesson 1 Homework
CengageNow
5 points
Lesson 1 – Inventory and Inventory
Transactions
©2012 Gateway Community College
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Lesson 2 – Inventory Costing Methods
Interactive Lecture and Quiz
PowerPoint presentation
5 points
Lesson 2 Homework
CengageNow
5 points
Interactive Lecture and Quiz
PowerPoint presentation
5 points
Lesson 3 Homework
CengageNow
5 points
Lesson 3 – Lower of Cost or Market, Inventory
Analysis and Inventory Errors
*Use this table to fill out the course calendar. Be sure to add dates in the course calendar.
Learning Activities
The learning activities section is a way for you to sequence your students learning. Consider this as
your way of guiding them to understanding and scaffolding their learning. Be creative, use the right
tool for the right objectives and whenever possible integrate knowledge checks with feedback and/or
reflection. Be sure to provide an overview of each activity in the sequence and how it will help the
learner achieve the learning objectives. Add learning activities as necessary.
Lesson 1 – Inventory and Inventory Transactions
Inventory is the products a company holds for resale. It appears on the balance sheet as a current asset.
In this lesson you will learn more about inventory and how to record both the purchase of and sale of
inventory.
Reading
Read pages 260 - 271 in your textbook, Cornerstones of Financial Accounting.
This reading will give you a basic understanding of inventory and journal entries regarding inventory.
Interactive Lecture
Inventory and Inventory Transactions
In this narrated PowerPoint lecture you will learn about inventory. You will see the types of businesses
that need to account for inventory as well as transactions for both the purchase and sale of inventory.
Activity
Assignment Name
CengageNow Homework
Graded Assignment
YES
<insert CengageNow link here>
Points Possible
5 pts
www.cengagebrain.com
©2012 Gateway Community College
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Lesson 1 Homework Problems from CengageNow
After completing the reading and the interactive lecture, proceed to CengageNow to complete Module 6,
Lesson 1, “Inventory and Inventory Transactions”.
Grading and Feedback
You can expect this assignment to be graded in CengageNow immediately after your submission.
Lesson 2 – Inventory Costing Methods
A business must decide how to cost the inventory they sell. It’s not always as easy as it sounds! We are
going to explore four methods for costing inventory.
Reading
Read pages 272 - 283 in your textbook, Cornerstones of Financial Accounting.
This reading will use one scenario to illustrate the four methods of inventory costing. Notice that these
are simply costing methods and do NOT necessarily mirror the way goods actually move out of the
company.
Interactive Lecture
Accounting for Business Transactions
In this narrated PowerPoint lecture you will see examples of each of four inventory costing methods as
well as a comparison of the methods. In each case we will be looking at two main values: ending
inventory and cost of goods sold.
Activity
Assignment Name
CengageNow Homework
Graded Assignment
YES
<insert CengageNow link here>
Points Possible
5 pts
www.cengagebrain.com
Lesson 2 Homework Problems from CengageNow
After completing the reading and interactive lecture, proceed to CengageNow to complete Module 5,
Lesson 2, “Inventory Costing Methods”.
Grading and Feedback
You can expect this assignment to be graded immediately in CengageNow after your submission.
Lesson 3 – Lower of Cost or Market, Inventory Analysis and Inventory Errors
This lesson teaches about a special rule of inventory, lower of cost or market, as well as inventory
analysis and dealing with inventory errors.
©2012 Gateway Community College
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Reading
Read pages 283 – 290 (we will NOT cover the appendices to the chapter) in your textbook,
Cornerstones of Financial Accounting.
This reading will show you how to apply the lower of cost of market rule, introduce three ratios for
inventory analysis, and demonstrate a unique characteristic of inventory errors.
Interactive Lecture
Lower of Cost or Market, Inventory Analysis and Inventory Errors
In this narrated PowerPoint lecture you see examples of the application of LCM, three inventory analysis
ratios, and inventory errors.
.
Activity
Assignment Name
CengageNow Homework
Graded Assignment
YES
<insert CengageNow link here>
Points Possible
5 pts
www.cengagebrain.com
Lesson 3 Homework Problems from CengageNow
After completing the reading and interactive lecture, proceed to CengageNow to complete Module 5,
Lesson 3, “Lower of Cost or Market, Inventory Analysis and Inventory Errors”.
Grading and Feedback
You can expect this assignment to be graded immediately in CengageNow after your submission.
Next Step – Exam 2, then Module 7.
©2012 Gateway Community College
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