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Mgmt_200_Spring_2008_Chap_7_Inventory(2,14)

Mgmt_200_Spring_2008_Chap_7_Inventory(2,14) - Inventory...

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Inventory Google (0%), Caterpillar (12.5%), Wal-Mart (22.3%) Management of Inventory Types of Inventory Merchandise Inventory Raw Materials, Work-in-process, Finished goods Other – Supplies, etc Cost of Inventory Purchase price Freight-in Other adjustments

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Inventory Equation (Cost of Goods Sold equation) Cost of goods sold = BI + Purchases – EI (This is the Inventory T-account) Costs IN = Costs OUT (= Cost of goods available for sale) BI + Purchases = COGS + EI
COGS when prices fluctuate 1. Lucent Stock Purchases: 100 @ \$12 = 1,200 300 @ \$5 = 1,500 1,100 @ \$1 = 1,100 1,500 = 3,800 Sell 500 shares for \$3.80 = \$1,900, gain on sale =? 2. Purchase of Gasoline: 2,000 gallons @ 1.20 = 3,600 8,000 gallons @ 1.40 = 11,200 5,000 gallons @ 2.10 = 10,500 15,000 gallons = 25,300 Ethical selling price =? Sell 9,000 gallons @ 2.50 = \$22,500, gross margin = ?

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Cost Flow Assumptions (Impact of inventory cost changes) Specific Identification (SPID) Weighted-Average Cost (WAVE) First-In First-Out (FIFO) Last-In First-Out (LIFO)
E7-5 Calculating Ending Inventory and Cost of Goods Sold Under FIFO, LIFO, and Weighted Average Solar Company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2007, the accounting records provided the following information for product 1: Required: Compute ending inventory and cost of goods sold under FIFO, LIFO, and weighted average costing methods. ( Hint: Set up adjacent columns for each case.)

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Choice of Inventory Method: Impact on the Financial Statements Income Statement - COGS Balance Sheet - Inventory Statement of Cash Flows - Nil LIFO Tax Benefit Tax Conformity Rule Additional disclosures: LIFO Reserve
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