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Inventory system inventory inventory cost flow

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Unformatted text preview: 6-20 SO 2 SO Inventory Cost Flow Assumptions Inventory Cost Flow Assumptions “First-In-First-Out (FIFO)” Illustration 6-5 6-21 SO 2 Explain the basis of accounting for inventories and apply the SO inventory cost flow methods under a periodic inventory system. inventory Inventory Cost Flow Assumptions Inventory Cost Flow Assumptions “Last-In-First-Out (LIFO)” Seldom coincides with actual physical flow of merchandise. 6-22 Latest goods purchased are first to be sold. Exceptions include goods stored in piles, such as coal or hay. SO 2 Explain the basis of accounting for inventories and apply the SO inventory cost flow methods under a periodic inventory system. inventory Inventory Cost Flow Assumptions Inventory Cost Flow Assumptions “Last-In-First-Out (LIFO)” Illustration 6-7 6-23 Inventory Cost Flow Assumptions Inventory Cost Flow Assumptions “Last-In-First-Out (LIFO)” Illustration 6-7 6-24 SO 2 Explain the basis of accounting for inventories and apply the SO inventory cost flow methods under a periodic inventory system. inventory Inventory Cost Flow Assumptions Inventory Cost Flow Assumptions “Average-Cost” Assumes goods are similar in nature. 6-25 Allocates cost of goods available for sale on the basis of weighted-average unit cost incurred. Applies weighted-average unit cost to the units on hand to determine cost of the ending inventory. SO 2 Explain the basis of accounting for inventories and apply the SO inventory cost flow methods under a periodic inventory system. inventory Inventory Cost Flow Assumptions Inventory Cost Flow Assumptions “Average-Cost” 6-26 Illustration 6-10 SO 2 Explain the basis of accounting for inventories and apply the SO inventory cost flow methods under a periodic inventory system. inventory Inventory Cost Flow Assumptions Inventory Cost Flow Assumptions “Average-Cost” 6-27 Illustration 6-10 SO 2 Explain the basis of accounting for inventories and apply the SO inventory cost flow methods under a periodic inventory system. inventory Financial Statement and Tax Effects Financial Statement and Tax Effects Comparative Financial Statement Summary FIFO Average LIFO $9,000 $9,000 $9,000 6,200 6,600 7,000 2,800 2,400 2,000 330 330 330 Income before taxes 2,470 2,070 1,670 Income tax expense 140 120 110 Net income $2,330 $1,950 $1,560 Inventory balance $5,800 $5,400 $5,000 Sales Cost of goods sold Gross profit Admin. & selling expense 6-28 LO 3 Explain the financial statement and tax effects of each LO of the inventory cost flow assumptions. of Financial Statement and Tax Effects Financial Statement and Tax Effects In Period of Rising Prices, FIFO Reports: FIFO Average LIFO $9,000 $9,000 $9,000 6,200 6,600 7,000 2,800 2,400 2,000 330 330 330 Income before taxes 2,470 2,070 1,670 Income tax expense 140 120 110 Net income $2,330 $1,950 $1,560 Inventory balance $5,800 $5,400 $5,000 Sales Lowest Cost of goods sold Gross profit Admin. & selling expense Highest 6-29 LO 3 Explain the financial statemen...
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This note was uploaded on 09/27/2013 for the course MGT 11A taught by Professor Armstrong during the Fall '08 term at UC Davis.

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