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.
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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
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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.
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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
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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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