Reimersppt_ch06

# Reimersppt_ch06 - Chapter 6 Reporting and Analyzing...

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Chapter 6 Reporting and Analyzing Inventory

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In Chapter 5 You learned how: o Merchandise is Acquired and Sold o Inventory Purchases and Sales are recorded in the company’s accounting records.
In Chapter 6 You will learn: How to calculate Cost of Goods Sold and Ending Inventory using the four Inventory Cost Flow Assumptions: o Specific Identification o Weighted Average Cost o FIFO o LIFO

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Specific Identification Method Each Unit Sold must be identified as coming from a specific purchase of inventory, at a specific cost. I know the VIN (Vehicle Identification number) of each car
Specific Identification Method If the Blue Car is sold, Cost of Goods Sold is \$22,000. I paid \$22,000 for the Blue Car.

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Specific Identification Method Is appropriate for firms with a small number of items that are generally large, luxury items such as custom jewelry, yachts or luxury cars.
Specific Identification Method Would not be appropriate for firms with many identical items with relatively low costs such as sneakers, soup or candy bars.

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Weighted Average Cost Method Put all of the dollars in the numerator. 2 @ \$50 = \$100 1 @ \$60 = \$ 60 1 @ \$68 = \$ 68 \$228 \$228
Put all of the Units in the denominator. 2 @ \$50 = \$100 1 @ \$60 = \$ 60 1 @ \$68 = \$ 68 \$228 Weighted Average Cost Method \$228 4 = \$57 average cost per unit

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sold, and all units held in inventory \$228 4 = \$57 average cost per unit
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Reimersppt_ch06 - Chapter 6 Reporting and Analyzing...

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