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Unformatted text preview: uniform prices IV. Example A. A company buys a box of paper clips for $70 on May 6, a box for $65 on May 3 and a box for $45 on May 1. One box is sold. 1. FIFO a) Debit COGS $45 b) Credit MI $45 2. LIFO a) Debit COGS $70 b) Credit MI $45 3. Weighted average a) Must find average of all inventory * (70 + 65 + 45)/ 3 = $60 b) Debit COGS $60 c) Credit MI $60 V. Specific Identification A. When units are sold, the specific cost of the unit sold is added to COGS B. Monitors the actual flow of inventory C. Not practical for large quantity inventories but is used for expensive, customizable or extremely large pieces of inventory 1. Ex: jewelry, furniture...
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