![]() Petersen and Knapp allegedly participated in channel stuffing, which is the process of recognizing and recording revenue in a current period that actually will be legally earned in one or more future fiscal periods. 6 The SEC alleged that OCZ’s former CEO Ryan Petersen engaged in a scheme to materially inflate OCZ’s revenues and gross margins from 2010 to 2012, and that OCZ’s former chief financial officer Arthur Knapp participated in certain accounting, disclosure, and internal accounting controls failures. 5 For example, in 2015, the Securities and Exchange Commission (SEC) charged two former top executives of OCZ Technology Group Inc. According to Antonia Chion, Associate Director of the SEC’s Division of Enforcement, those who participate in such activities will be held accountable. When management and executives participate in unethical or fraudulent short-term decision making, it can negatively impact a company on many levels. Normally, no significant adjustments are needed at the end of the period (before financial statements are prepared) since the inventory balance is maintained to continually parallel actual counts. As additional inventory is purchased during the period, the cost of those goods is added to the merchandise inventory account. Regardless of which cost assumption is chosen, recording inventory sales using the perpetual method involves recording both the revenue and the cost from the transaction for each individual sale. Calculations for Inventory Purchases and Sales during the Period, Perpetual Inventory Updating Note: For simplicity of demonstration, beginning inventory cost is assumed to be $21 per unit for all cost assumption methods. Demand for the product has spiked during the current fiscal period, while supply is limited, causing the selling price to escalate rapidly. Parents benefit by being apprised of the child’s location, and the student benefits by not having to constantly check in with parents. It is being marketed to parents of middle school and high school students as a safety measure. Product: Global Positioning System (GPS) Tracking Deviceĭescription: This product is an economical real-time GPS tracking device, designed for individuals who wish to monitor others’ whereabouts. Let’s return to The Spy Who Loves You Corporation data to demonstrate the four cost allocation methods, assuming inventory is updated on an ongoing basis in a perpetual system. Information Relating to All Cost Allocation Methods, but Specific to Perpetual Inventory Updating ![]() ![]() The technology advancements that are available for perpetual inventory systems make it nearly impossible for businesses to choose periodic inventory and forego the competitive advantages that the technology offers. This more specific information allows better control, greater accountability, increased efficiency, and overall quality monitoring of goods in inventory. Electronic product codes (EPCs) such as radio frequency identifiers (RFIDs) are essentially an evolved version of UPCs in which a chip/identifier is embedded in the EPC code that matches the goods to the actual batch of product that was produced. These UPC codes identify specific products but are not specific to the particular batch of goods that were produced. ![]() Universal product codes, commonly known as UPC barcodes, have advanced inventory management for large and small retail organizations, allowing real-time inventory counts and reorder capability that increased popularity of the perpetual inventory system. It has grown since the 1970s alongside the development of affordable personal computers. Perpetual inventory has been seen as the wave of the future for many years. Perpetual Inventory’s Advancements through Technology
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