Ch2- The Balance Sheet-4

Ch2- The Balance Sheet-4 - Inventory Accounting Methods A...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Inventory Accounting Methods A new company in its first year of operations purchases five products for sale in the order and at the prices shown. The company sells three of these items. Item #1 #2 #3 #4 #5 Purchase Price $5 $7 $8 $9 $11 2 ­2 Inventory Accounting Methods The cost flow assumptions for each method are shown below: Accounting Method FIFO LIFO Average Cost 2 ­3 Goods Sold Goods Remaining in Inventory Inventory Accounting Methods The resulting effect on the income statement and balance sheet are shown: Accounting Method FIFO LIFO Average Cost Cost of Goods Sold (Income Statement) $20 $28 $24 Inventory Valuation (Balance Sheet) $20 $12 $16 2 ­4 Inventory Accounting Methods (cont.) LIFO During ____________ Produces the highest COGS expense and the lowest ending inventory valuation Matches current costs to current sales 2­5 Inventory Accounting Methods (cont.) FIFO During _____________ Produces the lowest COGS expense and the highest ending inventory valuation Values ending inventory at current cost 2­6 Inventory Accounting Methods (cont.) Inventory valuation may significantly affect BOTH the balance sheet and the income statement Disclosure of inventory cost flow assumption found in notes Inventory reported on balance sheet at ___________ ____ _______ ___ ________ 2­7 ...
View Full Document

Page1 / 7

Ch2- The Balance Sheet-4 - Inventory Accounting Methods A...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online