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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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- Fall '08