equal to the actual cost of goods available. FIFO‚ LIFO‚ and weighted average are come methods used to account for inventory. FIFO assigns first costs incurred to COGS on income statement. LIFO assigns last costs incurred to COGS on the income statement and if using a weighted average method a company would assign average cost incurred to COGS on income statement. Deere and Company uses LIFO costing method. d. Assuming that prices are increasing‚ FIFO gives a better indication of the value of ending
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of goods sold……………………………….. 90‚000 Gross profit………………………………………… $60‚000 (15-20 min.) S 6-3 a b c Average Cost FIFO LIFO Cost of goods sold: Average (26 × $154.71) $4‚022.46 FIFO $1‚260 + (17 × $160) $3‚980 LIFO $4‚000 + (1 × $140) $4‚140 Ending inventory: Average (8 × $154.71) $ 1‚237.68 FIFO (8 × $160) $1‚280 LIFO (8 × $140) $1‚120 Computations: Units sold = 26 (9 + 25 − 8) Units in ending inventory =
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statement using each of the following cost flow methods: 1. First-in‚ first-out (FIFO) 2. Last-in‚ last-out (LIFO) 3. Average cost E8-14 Altira uses a perpetual inventory system. Determine the inventory balance Altira would report in its August 31‚ 2011‚ balance sheet and the cost of goods sold it would report in its August 2011 income statement using each of the following cost flow methods: 1. FIFO: 2. LIFO: 3. Average cost E8-18 1. Steelcase adjusts the LIFO reserve at the
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Transaction Quantity Price/Cost 1/1 Beginning Inventory 1‚000 $12 2/4 Purchases 2‚000 18 2/20 Sale 2‚500 30 4/2 Purchase 3‚000 23 11/4 Sale 2‚200 33 Required: 1. Compute cost of goods sold from 1/1 through 2/21 under the FIFO cost flow assumption. 2. Compute ending inventory at 2/21 under the FIFO cost flow assumption. 3. Compute cost of goods sold from 1/1 through 2/21 under the LIFO cost flow assumption. 4. Compute ending inventory at 2/21 under the LIFO cost flow assumption. 5. Compute cost of goods sold
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reporting the highest amount of income possible. Thus the CEO will be pleased if the company uses the FIFO method. This method recognizes as cost of goods sold the oldest costs‚ and because prices are rising‚ the costs charged to cost of goods sold will be less than if LIFO is used. b). It would be difficult to state absolutely which method is truly in the best interest of the stockholders‚ as FIFO results in lower COGS on the income report; it also results in higher earnings. But when earnings are
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what do you think motivated management to select this method? Under the inventories footnotes‚ below the financial statements (page 46)‚ Nash-Finch says that 79% of their inventories are valued with LIFO. The additional 21% is calculated using FIFO. By using LIFO‚ Nash-Finch is able to report lower holding inventories by $90.7 million for 2012. Being able to report lower inventories lets the company defer holding gains and not pay taxes on that additional amount of inventory. They are also
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6-2 Lewis Corporation* Lewis Corporation had traditionally used the FIFO method of inventory valuation. You are given the information shown in exhibit 1 on transactions during the year affecting Lewis’s inventory account. (The purchases are in sequence during the year. The company uses a periodic inventory method). Exhibit 1 Inventory Transactions 2000-2002--------------------------------------------------- 2000 Beginning Balance 1
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April 30 and May 31 using the FIFO method. In addition‚ determine cost of goods sold for April and May. c) Compute the cost of the ending inventory on April 30 and May 31 using the LIFO method. In addition‚ determine cost of goods sold for April and May. d) Do X´s cash flows from operations for April and May differ depending on which inventory costing method is used? Explain. 2. INVENTORY METHODS a) A company decided to change its inventory valuation from FIFO to weighted average in a period
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affected: Retained Earnings: Overstated as net income is overstated. Ending Inventory: Over Stated Write the letter of the method that is most applicable to each statement. a. Specific identification b. Average cost c. First-in‚ first-out (FIFO) d. Last-in‚ first-out (LIFO) ____A___ 1. Is the most realistic ending inventory ____D___ 2. Results in cost of goods sold being closest to current product costs ____C___ 3. Results in highest income during periods of inflation ____C___ 4. Results
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for Sale $5‚500 ÷ Total Units Available for Sale 900 Ending inventory (100 X $6.11) Cost of goods sold (800 X $6.11) Weighted Average Unit Cost $6.11 = $ 611 4‚889 (b) Ending inventory is lower than FIFO ($700) and higher than LIFO ($500). In contrast‚ cost of goods sold is higher than FIFO ($4‚800) and lower than LIFO ($5‚000). (c) The average-cost method uses a weighted-average unit cost‚ not a simple average of unit costs. EXERCISE 6-9 Cost Cameras Minolta Canon Total Light meters Vivitar
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