Additional slides.pdf - Chapter 7 – Several observations In perpetual WA a new purchase will normally change WA unit cost In perpetual WA we will use

Additional slides.pdf - Chapter 7 – Several observations...

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Chapter 7 – Several observations } In perpetual + WA, a new purchase will normally change WA unit cost. } In perpetual + WA, we will use multiple WA unit costs throughout the period à moving WA unit cost } In periodic + WA, we will use only one WA unit cost throughout the period. } Under WA, perpetual and periodic will generate different results. } Under FIFO, perpetual and periodic will generate same results.
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Chapter 7 – Use “COS = BI + P – EI” to make inferences } When purchase prices (unit costs) of inventory are rising, which method will produce lower COS, FIFO or WA? Why? } TIP: Consider which method will produce higher EI. FIFO WA EI The most recent units remain in EI. The “average” units remain in EI. Rising unit costs “Average” units are something in between the most expensive and the cheapest units. EI EI > COS = BI + P – EI COS = BI + P – EI < The most recent units are the most expensive.
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Chapter 7 – Use “COS = BI + P – EI” to make inferences } If EI of the current period is overstated, will COS of the
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  • Fall '08
  • JessicaStockie

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