normal market conditions‚ using the FIFO method for recording inventory may be the prudent calculation and result in the highest stated revenues. However‚ if the price of a certain ingredient for a particular drug sky rockets because of a worldwide drought‚ then it would make more sense to use the LIFO method. This is because the LIFO method would result in higher Cost of Goods Sold‚ and thus less Taxable Income. IFRS does not permit companies to use the LIFO method‚ which seems odd given that IFRS
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the Beginning Inventory 1020.00 21.20 21624.00 From the first purchase 700.00 21.50 15050.00 From the second purchase 700.00 21.50 15050.00 Inventory Statement for 2006‚ FIFO Method Cost of Goods Sold Cost of Goods Sold Total / Cost of Goods Sold Ending Inventory Total / Ending Inventory Inventory Statement for 2005‚ FIFO Method From the third purchase 660.00 22.00 14520.00 3080.00 66244.00 From the third purchase 40.00 22.00 880.00 From the fourth purchase 1000.00 22.25 22250.00 1040
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software development costs. Inventory With US GAAP‚ LIFO method is used for costing inventory and in measuring‚ inventory is carried at the lower of cost or market value (current replacement cost but not greater than net realizable value). And in writing down inventory‚ any write-down of inventory to the lower of cost or market creates a new cost basis that subsequently cannot be reversed. With IFRS‚ (IAS 2)‚ LIFO method is prohibited and FIFO is used for costing inventory and the same cost formula
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1. Read the footnotes carefully. Identify four accounting policy changes and accounting estimates that Harnischfeger made during 1984 and estimate as accurately as possible the effect of these changes on the company’s 1984 reported profits? One accounting change that Harnischfeger made was that they were going to include products purchased from Kobe Steel in their net sales. Before November 1‚ 1983 only the gross margin on Kobe products was included in their net sales. Harnischfeger was also
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| | | | |4-3. |With inflation‚ what are the implications of using LIFO and FIFO inventory methods? How do they affect the cost of | | |goods sold?
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Summit Distributors was in danger of violating loan covenants because of slow economic activity and forecasted losses and was faced with a choice. Changing the inventory valuation method from LIFO to FIFO would avoid default but would require higher future income taxes. Not changing could mean default on covenants‚ renegotiating loan terms at less favorable interest rates‚ or possible bankruptcy. Therefor even if we assumed no cash- flow consequences associated with the change‚ the answer would
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statements under the average cost‚ FIFO‚ and LIFO methods. 2. Sales revenue for December totaled $23‚000. Compute 25th Century’s gross profit for December under each method. 3. Which method will result in the lowest income taxes for 25th Century? Why? Which method will result in the highest net income for 25th Century? Why? ------------------------------------------------- E-15 Measuring and journalizing inventory and cost of goods sold in a perpetual system—FIFO [20–25 min] Putter’s Paradise
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Understanding Accounting Concepts and Business Performance Evaluation 1. The principle or assumption dictating that efforts (expenses) be matched with accomplishments (revenues) is called? Matching Principle 2. One of the following statements about the accrual basis of accounting is false. That statement is: Expense is recorded before the sales has been carried out. 3. In periods of rising prices‚ LIFO will produce following effect on net income: 1. Lower ending inventory
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E5-11 a) Compute Payton’s gross profit. GROSS PROFIT = 900‚00 - 540‚000 = $ 360‚000 ______________________________________ b) Compute the gross profit rate. Why is this rate computed by financial statement users? (360‚000/900‚000)/100 = 4/10of 100 = 40% This is known as the GROSS PROFIT MARGIN. ______________________________________ c) What is Payton’s income from operations and net income? 1)Income from Operations = 360‚000 - 230‚000 = $130‚000. 2)Net Income = 130‚000 - 11‚000
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STUDENT SERVICE ENTERPRISE INVENTORY SYSTEM A Concept Paper Presented to The Faculty of the College of Computer Studies Central Philippine University Jaro‚ Iloilo City‚ Philippines In partial fulfilment Of the Requirements in CS318 – Research Methods in IT By JanelynGrasparil BSIT – 4 July‚ 2012 CHAPTER 1 INTRODUCTION Overview of the Current State of Technology With the power of technology nowadays‚ people
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