Inventory Costing Methods, ACC 100 Accounting Principles I Week 6 Discussion 1 help

  

Inventory Costing Methods” Please respond to the following:Use the Internet to research the annual report of at least three (3) merchandising companies. Determine the costing method (Last In First Out [LIFO], First In First Out [FIFO], and weighted average) that is used to record inventory. Next, watch C. Pence’s video:Identify the primary benefits in using the costing method (LIFO, FIFO, and weighted average) that is used to record inventory. Explain at least three (3) reasons that would lead each of your chosen companies to switch to a different costing method.
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Accounting I
ACC 100
Inventories
Topics





Classifying inventories
Determining inventory quantities
Inventory costing
Inventory errors
Statement presentation and analysis
Classifying Inventories
Goods held for sale in the normal course of
business
AND
Goods that are used to produce other products
Classifying Inventories
• Raw Materials
Manufacturing • Work in Process
Business
• Finished Goods
Merchandising • Merchandise
Business
Inventory
Determining Inventory Quantities
Inventory Systems
Perpetual
System
Periodic
System
• Inventory records are
updated with every
purchase and every sale
• Provides better control
over inventories
• Inventory records are
updated only at the end
of the period when a
physical count is taken
Determining Inventory Quantities
Perpetual
System
Check accuracy of
inventory records
Determine
inventory lost
Periodic
System
Determine
inventory on hand
and cost of goods
sold for period
Inventory Costing
First in –
First out
Average
cost
Last in –
First out
Specific unit
cost
First In – First Out – FIFO
First In – First Out
First In – First Out – FIFO
Product – 122A
First to be sold
Date
Purchased
1/5
Units
Price
2
$100
1/8
1
$110
1/10
1
$120
1/15
3
$125
First In – First Out – FIFO
Sales (2 @ $160)
Cost of Goods (2 @ $100)
Gross Profit
$320
200
120
First to be sold
Date
Purchased
1/5
Units
Price
2
$100
1/8
1
$110
1/10
1
$120
1/15
3
$125
Last In – First Out – LIFO
Last In – First Out
Last In – First Out – LIFO
Product – 122A
First to be sold
Date
Purchased
Units
Price
1/5
2
$100
1/8
1
$112
1/10
1
$120
1/15
3
$125
Last In – First Out – LIFO
Sales (2 @ $160)
Cost of Goods (2 @ $125)
Gross Profit
First to be sold
$320
250
70
Date
Purchased
Units
Price
1/5
1/8
1/10
1/15
2
1
1
3
$100
$112
$120
$125
Average Cost
Date
Purchased
Units
Price
1/5
2
$100
1/8
1
$110
1/10
1
$120
1/15
3
$125
7 units at $805
Average
$115 per unit
Average Cost
Sales (2 @ $160)
Cost of Goods (2 @ $115)
Gross Profit
Date
Purchased
1/5
Units
Price
2
$100
1/8
1
$110
1/10
1
$120
1/15
3
$125
$320
230
90
7 units at $805
Average
$115 per unit
Real Estate
229 Beauty Lane
$241,050
Real Estate
225 Beauty Lane
$238,650
Real Estate
223 Beauty Lane
$231,250
Specific Unit Cost
PROPERTIES
On passing, ‘Finish’ button:
On failing, ‘Finish’ button:
Allow user to leave quiz:
User may view slides after quiz:
User may attempt quiz:
Goes to Next Slide
Goes to Next Slide
At any time
At any time
Unlimited times
Inventory Errors
Beginning Inventory
Cost of Goods
Purchased
Cost of Goods Available
for Sale
Cost of Goods Sold
Ending Inventory
Statement Presentation And Analysis
Computer Giant, Inc.
Balance Sheet as of December 31, 2012
Assets:
Current Assets
Cash
$32,000
Accounts Receivable
10,000
Inventory
38,050
Prepaid Rents
Total Current Assets
7,000
$87,050
Statement Presentation And Analysis
Computer Giant, Inc.
Income Statement for the Period Ending December 31, 2012
Sales
$660,000
Less: Sales discounts
$ 7,000
Net Sales
$653,000
Cost of Goods Sold
Beginning inventory, Jan 1
Add: Purchases
Freight In
Less: Purchase discounts
Purchase returns
Net Purchases
Goods available for sale
Less: Ending inventory, Dec 31
$120,000
$230,000
Prepare
an $10,000
(2,400)
Adjusted
Trial (3,600)
Balance
234,000
354,000
71,000
Cost of goods sold
283,000
Gross profit
370,000
Cost of Goods Sold
FIFO – $200
LIFO – $250
AVERAGE – $230
Date
Purchased
1/5
Units
Price
2
$100
1/8
1
$110
1/10
1
$120
1/15
3
$125
Inventory – Balance Sheet
FIFO – $605
LIFO – $555
AVERAGE – $575
Date
Purchased
1/5
Units
Price
2
$100
1/8
1
$110
1/10
1
$120
1/15
3
$125
PROPERTIES
On passing, ‘Finish’ button:
On failing, ‘Finish’ button:
Allow user to leave quiz:
User may view slides after quiz:
User may attempt quiz:
Goes to Next Slide
Goes to Next Slide
At any time
At any time
Unlimited times
Summary





Classifying inventories
Determining inventory quantities
Inventory costing
Inventory errors
Statement presentation and analysis

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