Stacked: A Manufacturing Inventory Exercise

On December 6, 2023, Shirley Rose, owner of the toy manufacturer Stacked, was reviewing the company’s financial performance for its fourth fiscal year, ending November 30, 2023. Stacked manufactured toy wooden blocks in Stratford, Ontario, Canada. Rose needed to record all necessary accounting transactions for fiscal year (FY) 2023 using the FY 2022 statement of financial position, the FY 2023 list of cash receipts and disbursements, and other related information provided in the exercise.

This exercise is suitable for an introductory-level financial accounting course with a manufacturing inventory component. It focuses on manufacturing inventory transactions but also covers adjusting entries, long-lived assets, finance leases, and liabilities. Once students have had exposure to these topics, the exercise could be taught or used as a testing point. The exercise helps students learn to create accounting entries related to manufacturing inventories. After completing the exercise, students should be able to do the following:<ul><li>Distinguish between cash and non-cash transactions.</li><li>Use the cash receipts and disbursements list to understand what has been recorded and determine what needs to be adjusted based on the accrual method of accounting.</li><li>Classify transactions in a manufacturing company as either product or period costs and allocate the costs accordingly.</li><li>Determine which costs should be allocated to each of three types of inventory accounts: raw materials, work-in-process, and finished goods.</li></ul>

• Financial accounting
• Manufacturing inventory
• Journal entries
• T-accounts
• Adjusting entries