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Exercise 8-12TheFASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. The specific citation for each of the following items is:1.Define the meaning of cost as it applies to the initial measurement of inventory.2.Indicate the circumstances when it is appropriate to initially measure agricultural inventory at fair value.8-26
Chapter 08 - Inventories: MeasurementExercise 8-12 (concluded)3.What is a major objective of accounting for inventory?4.Are abnormal freight charges included in the cost of inventory?8-27
Chapter 08 - Inventories: MeasurementExercise 8-13Cost of goods available for sale:Beginning inventory (2,000 x $6.10)$12,200Purchases:10,000 x $5.50$55,0006,000 x $5.0030,00085,000Cost of goods available (18,000 units)$97,200First-in, first-out (FIFO)Cost of goods available for sale (18,000 units)$97,200Less: Ending inventory (determined below)(15,000)Cost of goods sold$82,200Cost of ending inventory:Date of purchaseUnitsUnit cost Total costAugust 183,000$5.00$15,000Last-in, first-out (LIFO)Cost of goods available for sale (18,000 units)$97,200Less: Ending inventory(determined below)(17,700)Cost of goods sold$79,500Cost of ending inventory:Date of purchaseUnitsUnit cost Total costBeg. Inv.2,000$6.10$12,200August 81,0005.505,500Total$17,7008-28