Beginning inventory 2000 x 4 8000 purchases 6000 x

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Intermediate Accounting: Reporting and Analysis
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Chapter 7 / Exercise 7-27
Intermediate Accounting: Reporting and Analysis
Jones/Wahlen
Expert Verified
Beginning inventory (2,000 x $4)$ 8,000Purchases:6,000 x $4.4026,4002,000 x 4.759,500Goods available for sale$43,900Calculate Goods Available for SaleWhich Cost Flow Assumptions to Adopt?
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Intermediate Accounting: Reporting and Analysis
The document you are viewing contains questions related to this textbook.
Chapter 7 / Exercise 7-27
Intermediate Accounting: Reporting and Analysis
Jones/Wahlen
Expert Verified
8-32Includes in cost of goods sold the costs of the specific items sold.Used when handling a relatively small number of costly, easily distinguishable items.Matches actual costs against actual revenue.Cost flow matches the physical flow of the goods.May allow a company to manipulate net income.Specific IdentificationWhich Cost Flow Assumptions to Adopt?LO5 Describe and compare the cost flow assumptions used to account for inventories.
8-33Illustration:Call-Mart Inc.’s 6,000 units of inventory consists of 1,000 units from the March 2 purchase, 3,000 from the March 15 purchase, and 2,000 from the March 30 purchase. Compute the amount of ending inventory and cost of goods sold.Specific IdentificationIllustration 8-12Advance slide in presentation mode to reveal answer.
8-34Prices items in the inventory on the basis of the average cost of all similar goods available during the period.Not as subject to income manipulation.Measuring a specific physical flow of inventory is often impossible.Average-CostWhich Cost Flow Assumptions to Adopt?LO5 Describe and compare the cost flow assumptions used to account for inventories.
8-35Illustration 8-13Weighted-Average MethodLO 5Average-CostAdvance slide in presentation mode to reveal answer.
8-36Illustration 8-14In this method, Call-Mart computes a new average unit cost each time it makes a purchase.Moving-Average MethodAverage-CostAdvance slide in presentation mode to reveal answer.LO5 Describe and compare the cost flow assumptions used to account for inventories.
8-37Prices items in the inventory on the basis of the average cost of all similar goods available during the period.Assumes goods are used in the order in which they are purchased.Approximates the physical flow of goods.Ending inventory is close to current cost.Fails to match current costs against current revenues.First-In, First-Out (FIFO)Which Cost Flow Assumptions to Adopt?LO5 Describe and compare the cost flow assumptions used to account for inventories.
8-38Illustration 8-15Periodic Inventory SystemDetermine cost of ending inventory by taking the cost of the most recent purchase and working back until it accounts for all units in the inventory.First-In, First-Out (FIFO)Advance slide in presentation mode to reveal answer.LO5 Describe and compare the cost flow assumptions used to account for inventories.
8-39Illustration 8-16In all cases where FIFO is used, the inventory and cost of goods sold would be the sameat the end of the month whether a perpetual or periodic system is used.First-In, First-Out (FIFO)Perpetual Inventory SystemAdvance slide in presentation mode to reveal answer.LO5 Describe and compare the cost flow assumptions used to account for inventories.
8-40Illustration 8-17The cost of the total quantity sold or issued during the month comes from the most recent purchases.Last-In, First-Out (LIFO)Periodic Inventory SystemAdvance slide in presentation mode to reveal answer.LO5 Describe and compare the cost flow assumptions used to account for inventories.

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