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Acc 201 Chapter 7 part 1 final exam

Acc 201 Chapter 7 part 1 final exam - Specific...

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Chapter 7: Inventory COGS equation BI + P - EI = COGS. Cash flow assumptions pg. 346 The choice of an inventory costing method is NOT based on the physical flow of goods. (applies before any sales and cost of goods are recorded) How to use, which is better based on circumstance: FIFO, LIFO, specific identification, weighted average Price UP Price DOWN LIFO FIFO LIFO FIFO FIFO: First goods purchased are the first goods sold. (first in, first out) For inventory with decreasing costs , FIFO is usually used for both the tax return/ financial statements. LIFO: the most recently purchased units are sold first. (last in, last out) LIFO is usually used on tax return because it usually results in lower income taxes.
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Unformatted text preview: Specific Identification: Identifies the cost of the specific item that was sold. Weighted Average: (total cost of goods available for sale/ total units available) Inventory turnover ratio COGS/Average Inventory Manager’s Choice: manager choice on two bases: 1. Net income effects (prefer to report high earnings on companies) 2. Income tax effects (prefer to pay the least amount of taxes possible that the law will allow and pay as late as possible; least-latest rule) LIFO is usually used on tax return because it usually results in lower income taxes....
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