UT Knoxville ACCT 200 - Chapter 6 continued
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ACCT 200 Lecture 9 Outline of Last Lecture I. ReviewII. Uncollectibles III. Net Realizable ValueIV. EOP adjustmentV. Notes ReceivableVI. Things to rememberVII. Homework 6-2Outline of Current Lecture I. What companies can do involving inventoryII. Methods III. Accounts receivable turnoverIV. TurnoverV. Inventory TurnoverVI. Homework EP-1Current LectureI. What companies can do involving inventorya. Tell the difference between every item sold—this involves big, custom assets (i.e. cars, boats, etc.)These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.b. OR they cannot specifically identify what individual units sold (like cans of Pepsi, Coke, etc.)II. Methods a. Average costb. FIFO—first in, first outc. LIFO—last in, first outIII. Accounts receivable turnovera. This tells how quickly a company collects receivables in a measure of liquidity (ease of turning it into cash)IV. Turnovera. Turnover = (net credit sales) / (average net accounts receivable)b. Net accounts receivable= Accounts Receivable – allowance for doubtful accountsc. Average accounts receivable = (beginning of year Accounts Receivable + end of year accounts receivable) / (2)d. The higher the return ratio, the betterV. Inventory Turnovera. Inventory Turnover = (cost of goods sold) / (average inventory)b. Average inventory = (beginning of year inventory + end of year inventory) / 2c. The higher the inventory turnover, the better.VI. Homework EP-1a. Note receivable $90000Accounts receivable ($90000)b. Interest received 362.50Interest revenue $362.5c. Interest revenue $387.50d. Collect cashe. Cash $90750Note receivable (90000)Interest receivable (750)**NO REVENUE IS MADE IN NOVEMBER, it is only collected in

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