(20–25 minutes) (a) (1) LIFO 600 @ $6.00 = $3‚600 100 @ $6.08 = 608 $4‚208 (2) Average cost Total cost = $33‚655* = $6.35 average cost per unit Total units 5‚300 700 @ $6.35 = $4‚445 EXERCISE 8-14 (Continued) *Units Price Total Cost 600 @ $6.00 = $ 3‚600 1‚500 @ $6.08 = 9‚120 800 @ $6.40 = 5‚120 1‚200 @ $6.50 = 7‚800 700 @ $6.60 = 4‚620 500 @ $6.79 = 3‚395 5‚300 $33‚655 (b) (1) FIFO 500 @ $6.79 = $3‚395
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flow of cost factors‚ such as first-in first-out (FIFO)‚ average‚ and last-in first-out (LIFO). The major objective in selecting a method should be to choose the one which‚ under the circumstances‚ most clearly reflects periodic income. May an entity elect LIFO method for inventory cost? IAS 2 Inventories Cost formula 25 The cost of inventories‚ other than those dealt with in paragraph 23‚ shall be assigned by using the first-in‚ first-out (FIFO) or weighted average cost formula. An entity shall
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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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and state income tax regulations must be considered. • First-In‚ First-Out Method. The first-in‚ first-out (FIFO) method of costing has the advantage of simplicity. The FIFO method assumes that materials issued are taken from the oldest materials in stock. Therefore‚ the materials are costed at the prices paid for the oldest materials. In many companies‚ the flow of costs using FIFO closely parallels the physical flow of materials. For example‚ if materials have a tendency to deteriorate in storage
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comparison to Smelters current FIFO Inventory management system and issued a proposal to change their inventory valuation method from LIFO to FIFO. Factors to Consider Western Aluminum addressed multiple topics to validate their proposal idea. As mentioned above‚ the acquisition of Smelter and its projected out puts is one consideration made. The high-value LIFO layers and commodity price swings has resulted in large non-cash adjustments to Inventory. Switching to FIFO will allow for period end
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C521 Exam 1 Name: | Imtiaz Ahmed | You have three hours to take and submit this exam. You must save this file using the following convention: LastnameFirstname (for example‚ my exam would be saved as SmithReed.docx). If you do not have the most current version of Word‚ that is OK. The file extension might be .doc instead. The document is protected (Tools menu) so that the data in the answer cells is type-restricted. You may unprotect the document in order to “paste” excerpts from Excel
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balance sheet instead. 7-74 The discounted cash flow model implies that‚ other things being equal‚ it is always desirable to take a tax deduction earlier rather than later. Moreover‚ if prices rise‚ LIFO will generate earlier tax deductions than FIFO. By switching from LIFO to FIFO‚ Chrysler deliberately boosted its tax bills by $53 million in exchange
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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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entities to examine when attempting to understand inventory management systems. The type of inventory a company has determines the method they use. Retail companies use the retail inventory method as a base system. Last-in-First-Out (LIFO) and First-in-First-Out (FIFO) are the two systems that appear to be used more frequently. Other systems used are the Just in Time or JIT method and the Average Cost method. The following paragraphs will describe different companies and the type or types of inventory
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