230a_ch7 - Assumption Income Statement Balance Sheet FIFO...

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Chapter 7: Inventory Balance Sheet: A = L + SE Assets Cash and Cash Equivalents Accounts Receivables Inventory Liabilities Accounts Payable Income Statement: Rev – Exp = NI Revenue Cost of Goods Sold Gross Margin Bad Debt Expense Inventory Cost Flow Assumptions=> which costs go to cost of goods sold 1. Specific Identification 2. First -In, First-Out (FIFO). cost of goods sold. = cost of earliest purchases Cost of first car sold? 3. Last-In, First-Out (LIFO) cost of goods sold cost of latest purchases Cost of fist car sold? 4. Weighted Average Cost of goods sold = average of all goods available for sale during accounting period, including the cost applicable to the beginning inventor. Cost of first car sold?
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Beginning Inventory Cost car 1 2500 car 2 2900 car 3 3000 cost of Goods Available for Sale (Beginning inventory + purchases) 8400 Sales: One Car 5500 Cost Flow Assumptions Financial Statements FIFO Weighted Average LIFO Sales Cost of Goods sold Gross Margin on Sales Ending Inventory Cost Flow
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Unformatted text preview: Assumption Income Statement Balance Sheet FIFO LIFO Inventory Systems: Periodic and Perpetual- (how often do you calculate COGS) Periodic: Firm counts inventory at the end of the accounting period. Solves for Inventory used (cost of goods sold) Journal entry for sales during the year: Journal entry at end of year to record cost of goods sold Perpetual : Firm calculates and records cost of goods sold whenever it takes an item from inventory. Journal entry for sales and cost of goods sold: E 7-7 FIFO Perpetual FIFO periodic LIFO perpetual LIFO periodic Sales 440,000 440,000 440,000 440,000 COGS Gross Profit Operating expenses 195,000 195,000 195,000 195,000 Income before taxes Income tax expense (30%) Net Income Beg. Inv End. Inv Valuation Basis : GAAP- lower of cost or market (LCM) LCM: minimum( acquisition cost , market value). Market value = replacement value. Journal entry to recognize decline in market value...
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230a_ch7 - Assumption Income Statement Balance Sheet FIFO...

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