Financial Act Chpt 6 Notes

# So sold 5 units of 5 each and 1 unit of 7 each cost

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Unformatted text preview: er FIFO: First Units in were the first units sold. So, sold 5 units of \$5 each and 1 unit of \$7 each • Cost of goods sold = (5 x \$5) + (1 X \$7) = \$32 • Ending Inventory = 4 units left at \$7 each = \$28 Under LIFO: Last units in were the first units sold. So, sold 5 units at \$7 each and 1 unit at \$5 each. • Cost of goods sold = (5 x \$7) + (1 x \$5) = \$40 • Ending inventory = 4 units left at \$5 each = \$20 Under Weighted Average: • Total cost of inventory was \$60/10 units available for sale = \$6 per unit • Cost of goods sold = 6 units sold at \$6 each = \$36 • Ending inventory = 4 units left at \$6 each = \$24 Income statement under 3 approaches: LIFO: Sales \$60 FIFO: Sales \$60 • COGS \$32 -COGS \$40 GP GP \$28 \$20 WA: Sales \$60 -COGS \$36 GP \$24 In periods of rising prices: • FIFO yields better balance sheet reporting (inventory valued closer to replacement cost because newest inventory is still on balance sheet); could have improper...
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## This note was uploaded on 01/22/2014 for the course ACG 2021 taught by Professor Linkovich during the Spring '08 term at University of South Florida - Tampa.

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