...Timothy Towfeless Acct 301A Paper Prof. Jose Miranda Lopez FIFO Cost Flow for Buffalo Wild Wings (BWLD) Inventory Throughout the course of this class, many topics have been brought to the table. In every accounting class, they will reiterate the conceptual framework of accounting by briefly discuss about the Income Statement, Balance Sheet and Cash Flow Statement. Each accounting class they will go in depth of those conceptual frameworks, but in the perspective from the side of Assets or Liability or Stockholder’s equity. Majority of the course was spent on the asset side, topics such as Cash, Receivables, and Inventory Valuations, also with additional issues, were discussed. When choosing a restaurant for a topic, the first thing that comes to mind is inventory. How can a restaurant operate without taking into account inventory? Buffalo Wild Wing is a very unique restaurant that operates on providing wings and sports bar ambiance. In order to understand how they control inventory, there needs to be a specific identification. Specific Identification calls for identifying each item sold and each item in inventory; is used by companies that focus on selling inventories that will not be substantial and can be counted physically without incurring heavy costs for tracking individual inventory items. This is a good idea for Buffalo Wild Wings because they can keep track of the food inventory, but the disadvantages to this method involve income manipulation on similar or identical...
Words: 650 - Pages: 3
...I الجامعة اإلسالمية -غزة كليــــــة التـــجــــــــارة قســــم المحــاسبـــــــــة Islamic University – Gaza Faculty of Commerce Department of Accounting A Graduation Research Proposal Presented to the Faculty of Commerce The Islamic University of Gaza Prepared By Mosa zuhair al-nassan Mosbah al-shaghnobi Mohammed Nabaheen 120091941 120092552 120102597 Supervisor's name Mr. Salah Shubir 3102 I I A Holy Qur'an Verse A Holy Qur'an Verse } وَقُل اعْمَلُوا فَسَيَرَى اللَّهُ عَمَلَكُمْ وَرَسُولهُ وَالْمُؤْمِنُونَ{ سورة التوبة– اآلية 105 صدق اهلل العظيم I Dedication Dedication We dedicate this work to our lovely Palestine, to second home of Islamic university, and to our parents, who sacrificed everything in their life for us, and also we thank them for pushing us to success. For all of Those, Who are inspiring us and see us on our way. II II Acknowledgement Acknowledgement In the beginning, we thank Allah for giving us the strength and health to let this work see the light and our parents for their help and support. Our Prophet Mohammed said: “Who doesn’t thank people he doesn’t thank Allah”. We want to thank everyone help and participated in making this study starting from our honorable: Mr. Salah Shubair. Who put a lot of faith in our capabilities and encouraged us to complete this study. We thank all of our teachers in the faculty of commerce and our colleagues...
Words: 11924 - Pages: 48
...2OTH BATCH ACCOUNTING SUBMITTED TO: MELITA MEHJABEEN SUBMITTED ON: 30/ 04/ 2012 FIFO [ FIRST IN FIRST OUT ] | ADVANTAGES | DISADVANTAGES | * If the business trades perishable goods with the use of FIFO it can avoid obsolescence of stock. * Closing stock valuation is done upon the most recent prices paid for stock which takes into account the rate of inflation. * The method is more realistic as the inventory is issued in the order in which they have been received. * FIFO is acceptable method of inventory valuation as per Accounting concepts and conventions. * Inventory is issued to production at the price actually paid purchase them. | * At times of high rate of inflation FIFO values closing stock at the latest price which is high and hence the profit gets overstated as the cost of goods sold gets reduced. * Higher income taxes may have to be paid as FIFO results in profits being inflated. * Manufacturing firms do not issue raw materials at the latest prices and hence it forms a barrier to setting realistic price for the final product. * Identical inventory is issued to production at a different price simply because they are deemed to be made out of different batches of production. This makes the calculation of unit cost difficult as it varies for different batches of production. | 4 LIFO [ LAST IN FIRST OUT ] | ADVANTAGES | DISADVANTAGES | * The inventory is issued to production at the most recent prices...
Words: 470 - Pages: 2
...following inventory valuation methods: Periodic FIFO (First In, First Out) Periodic Average Cost Perpetual FIFO Perpetual LIFO (Last In , First Out) to determine which inventory method to recommend to the management of the Company. A summary of my calculations follows. Provide an explanation of your calculations for each of the inventory valuation methods. Finally, your recommendation. Fully explain how your inventory valuation method impacts the Company’s net income and why it is better than the other methods. INCOME EFFECT LIFO | WA | FIFO | Sales | 100,000 | 100,000 | 100,000 | CGAS (Beg Inv. + Purchases) | 74,000 | 72,000 | 70,000 | Ending Inventory | (48,000) earlier cost | (50,000) | (52,000) later cost | CGS | 26,000 later cost | 22,000 | 18,000 earlier cost | Income Effect | 74,000 | 78,000 | 82,000 | Under the FIFO method, the first goods purchased are considered to be the first goods used or sold. Ending inventory is thus made up of the latest (most recent) purchases. Because of this, the FIFO method closely approximates the actual physical flow of merchandise and the cost allocated to ending inventory approximates current cost. Whenever the FIFO method is used, the ending inventory is the same whether a perpetual or periodic system is used. This is true even during periods of rising or falling prices because the inventory flow is always in chronological order. The FIFO method does not permit much manipulation of...
Words: 710 - Pages: 3
...4. In considering the rules based approach of GAAP and the principles based approach of IFRS we looked at GAAP first. GAAP provides application clarity, low risk, and for companies in the same industry there is easy comparability. These Rules, however, must be accounted for using these rules even if the information is misleading, uneasy to compare across industries and the risk increases when rules are not followed. IFRS allows us to consider best out of multiple ways to account for transactions, comparibility among companies across multiple industries, and it is easier to defend actions and positions by using the principles that were followed. That being said, we believe that the IFRS approach is needed over the US approach. We believe that the rules are put into place by the US approach and companies then take the steps necessary to get around them. We believe that principles should be used and there should be required disclosures to guide investors and shareholders and help them understand the principles that were used and the decisions made that were based on these principles. There is still need for solid framework for larger key issues, but we feel as though principles are the right way to go. To deal with inconsistencies, there would still be a few concrete rules laid out to govern however principles will be still be used. Lessees and Lessors will also be required to show equal and opposite assets and liabilities on their balance sheets for every and all lease without...
Words: 763 - Pages: 4
...sale, assets in production, and assets that will be used for future production of goods. A company’s ending inventory can be calculated by adding the value of any beginning inventory with net purchases then subtracting the cost of goods sold. The equivalent mathematical representation is: Ending Inventory = Beginning Inventory + Net Purchases - Cost of Goods Sold (Inventory valuation, 2010). While there are numerous industry recognized standards for a valuation of inventory, three of the most common valuation systems include First-In, First-Out – FIFO, Last-In, First-Out – LIFO and Just-In-Time – JIT valuation systems. First-In, First-Out Goods processed or received by an organization are placed in holding as First-In, First-Out; this inventory system is used to track product for use and revenue gained. In the FIFO inventory valuation system, assets or inventory received first are the first ones to be used (Basu, 2013). FIFO regards the first unit arriveing in inventory as the first one sold. According to Wikipedia, inventory (n.d.) is commonly used to describe the goods and materials that a business holds for the ultimate purpose of resale. Additionally, the raw materials, work-in-process goods, and completely...
Words: 2902 - Pages: 12
...Workshop Three: Case Studies Case 6-2: A + B + C) FIFO, LIFO, AND AVERAGE COST METHODS FOR 2005, 2006, 2007: FIFO 2005 COGS 1840 X $20 total= $36,800 600 X $20.25 $12,150 380 X $21 $7,980 2820 X $56,930 2005 inventory 420 X 21 total= $8,820 400 X 21.25 $8,500 200 X 21.5 $4,300 1020 $21,620 LIFO 2005 COGS 200 X 21.5 TOTAL= $4,300 400 X 21.25 $8,500 800 X 21 $16,800 600 X 20.25 $12,150 820 X 20 $16,400 2820 $58,150 2005 INVENTORY 1020 X 20 TOTAL= $20,400 AVERAGE COST 2005 COGS 2820 X 20.456 TOTAL= $57,686 INVENTORY 1020 X 20.456 TOTAL= $20,865 FIFO 2006 COGS 420 X 21 TOTAL= 8820 400 X 21.25 8500 200 X 21.5 4300 700 X 21.5 15050 700 X 21.5 15050 660 X 22 14520 3080 66240 2006 INVENTORY 40 X 22 TOTAL= 880 1000 X 22.25 22250 1040 23130 LIFO 2006 COGS 1000 X 22.25 TOTAL= 22250 700 X 22 15400 700 X 21.5 15050 680 X 21.5 14620 3080 67320 2006 INVENTORY 20 X 21.5 430 1020 X 20 20400 1040 X 20 20830 AVERAGE COST 2006 COGS 3080 X 21.509 66248 INVENTORY 1040 X 21.509 22369 FIFO 2007 COGS 40 X 22 TOTAL= 880 1000 X 22.25 22250 1000 X 22.5 22500 700 X 22.75 15925 210 X 23 4830 2950 66385 2007 INVENTORY 490 X 23 TOTAL= 11270 700 X 23.5 16450 ...
Words: 682 - Pages: 3
...The End of LIFO Jordan Stepney 9910 Pineville Rd Apt 205 Raleigh, NC 27617 Jordanjay15@yahoo.com 919-770-0972 ACCT525 Current Acct Issues Professor Sharon Brown 08/14/2016 Introduction An interesting topic that I chose is LIFO accounting. LIFO stands for last in and first out. LIFO is a valuation method of inventory. The other valuation methods of inventory is FIFO, which stands for first in and first out and weighted average. FIFO is a popular valuation method along with LIFO. LIFO has its advantages and disadvantages. The advantages of LIFO is that current product is measure along with its current revenues. The current market prices are matched up with current revenues. As for FIFO the older costs is matched with the recent revenues, which understates the profit. As for the LIFO it’s a great measurement of current profit and it understates the cost of goods sold, which more of a profit is created. History LIFO is the valuation of inventory. Well the word inventory deprived from England. LIFO was the first inventory valuation method to be used. The idea of LIFO was to match up current costs with the current revenues. In 1918 LIFO was first discussed in The Revenue Act during World War I. America discussed that LIFO shouldn’t be change and should remained the same as England described LIFO. In the early 1930’s the LIFO talk started to progress. In 1936 Board of Directors of American Petroleum Institute recommended that companies should use the...
Words: 687 - Pages: 3
...The choice of inventory accounting methods, specifically for the case of FIFO and LIFO, has developed into a decision, which includes varying consequences and comes with specific implications and benefits, such as communicating private information with FIFO (Hughes, and Schwartz, 1988, p.42) or tax benefits for the choice of LIFO (Morse and Richardson, 1983, p.125). Every firm and manager has to face the decision of which accounting method to choose, and has to include several aspects into their decision making process and weigh the pros and cons in general. However, the empirical evidence (Frankel and Hsu, 2015, p.48) shows some controversies as to what inventory accounting methods firms decided to use in the past, even though the theory would...
Words: 979 - Pages: 4
...Acct 3511 Chapter 8 Concepts – Inventory & Cost of Goods Sold Professor Marco J. Malandra, CPA 1. State 4 characteristics of Inventory & Cost of Goods Sold (CGS)? Is Inventory initially capitalized or expensed? What concept determines when it’s expensed? Inventory: 1) Asset (current) 2) Balance Sheet 3) real 4) debit NAB CGS: 1) Expense 2) Income Statement 3) nominal 4) debit NAB Matching: Any expenses associated with revenue are recorded in the same period as the revenue. Inventory is not expensed until period sold, when Sales revenue is also recorded. 2. What is a Merchandiser and how do their FS’s differ from a Manufacturer or a Service Co? Retail & Wholesale: Buy Inventory or Merchandise, appears on BS until sold, then IS CGS. Manufacturer: Makes inventory appearing on BS or Notes in 3 stages, until sold, then IS CGS. 1) Raw Materials: Major resources to be used in manufacturing products. 2) Work-in-Process: Costs of materials, labor & overhead needed to make products. 3) Finished Goods: Completed WIP costs, ready to be sold. Service Co: No Inventory or CGS accounts (of course, many companies are hybrids, > 1 type). 3. Know the CGS Formula used to determine CGS on the IS: + Beginning Inventory (BI: Costs of inventory not sold from last period’s BS) + Purchases (All costs to buy including Transportation-in, less any Purchase Discount...
Words: 4264 - Pages: 18
...distribution industry. With their company positioned within the industrial sector of the industry, they are susceptible to cyclical pressures when the economy slows. In the current environment, growth has slowed and Summit Distributors is concerned about meeting the covenants in their agreement with Prime Trust Bank as their earnings have fallen and they have had to dig into their retained earnings. The below takes a look at possible opportunities that Summit has to improve their balance sheet, this would ensure that they are within the guidelines of their covenants. 1. If you were Kathy Hutton, what would you do? Due to the fragile nature of Summit Distributors business, we would agree with Dave Flander’s suggestion of going from LIFO to FIFO. There are a few negatives and positives with this decision. First, violating any of the loan covenants would alert the bank, and any future dealing with them would incur a 50 basis point increase on the lending rate (.50%). Also because of the switch older equipment would sit in storage for a longer period of time, thus forcing Summit to eventually sell it at a discount or depreciate it towards the base value only to have it collect dust. The reason for this is that the nature of the industry requires for our firm to have a variety of warehouses located in different locations with the newest equipment, in order to be competitive in the market. Due to the economic decline, fewer of our products will be purchased from us, and we can...
Words: 1644 - Pages: 7
...raw material, consisting of goods that are to be used in producing products. Overall, inventory should include all cost that are both ordinary and necessary to put goods in place and in condition for their resale. There are three basis approaches to valuing inventory that are allowed by Generally Accepted Accounting Principles (GAAP). First-in, first-out (FIFO) is an inventory method that assumes that the first items produced or purchased in the inventory are the first ones sold. This inventory method is acceptable under the U.S. Generally Accepted Accounting Principles (GAAP), as well as the International Financial Reporting Standards (IFRS). FIFO is most often used in accordance with the restaurant industry or businesses that deal with perishable products. This allows them to use all of their products before they expire or go to waste, which helps to lower their food costs. “In a period of inflation, FIFO produces a higher net income because the lower unit costs of the first units purchased matched against revenues. In a period of rising prices, FIFO reports the highest net income” (Kimmel et al, 2007, p. 278). FIFO is most recognized for the reason that it includes up to date purchases and, as such, more precisely reflects the price of substitutions. Last-in, First-out (LIFO) is an inventory method that assumes the last items produced or purchased in the inventory are the first ones sold. This inventory method is acceptable under the U.S....
Words: 677 - Pages: 3
...1. Inter-process Communication (IPC) Introduction Inter-Process Communication, which in short is known as IPC, deals mainly with the techniques and mechanisms that facilitate communication between processes. Now, why do we need special separate mechanisms or techniques for communicating between processes? Why isn't it possible to have information shared between two processes without using such special mechanisms? Let us start from something primitive. Imagine you have two glasses completely filled with water. One glass contains hot water and the other contains cold water. What can you do to make the temperature of water in both the glasses equal? The simplest answer will be to mix the water from both the glasses in a glass with much bigger capacity. Once water is mixed, the temperature becomes equal after some time. If one can remember, this will be framed as a problem with some numerical data in a High-School Physics examination. If we go by principles, then the phenomenon here is conduction. If we go by our topic of IPC, then we can say that since the two glasses were full, we had to use another glass with a larger capacity to mix the contents in order to balance their heat energy. We know that some medium or other is required for communication between different processes. Similarly, when it comes to computer programs, we need some mechanism or medium for communication. Primarily, processes can use the available memory to communicate with each other. But then, the memory...
Words: 2437 - Pages: 10
...About Nestle Nestlé is a multinational packaged foods company founded and headquartered in Vevey Switzerland. it is the world`s foremost Nutrition. Health & Wellness Company committed serving consumers all over the world. Their focus on responsible nutrition and promoting heaLth and wellness is a core value, emphasizing responsibility and sustainability. Nestlé products are sold in almost every country in the world. MISSION STATEMENT Nestlé is dedicated to providing the best foods to people throughout their day. Throughout their lives, throughout the world. With our unique experience of anticipating consumers’ needs and creating solutions. Nestle contributes to your well-being and enhances your quality of life.” COST ACCOUBTING INFORMATION SYSTEM OF NESTLE INPUT MEASUREMENT BASIS STANDARD COSTING Nestle is using STANDARD COSTING as a base for input measurement Standard costs are usually associated with a company’s costs of direct material, direct labor, and manufacturing overhead. Rather than assigning the actual costs of direct material, direct labor, and manufacturing overhead to a product, nestle’ like many manufacturers assigns the expected or standard cost. This means that its inventories and cost of goods sold will began with amounts reflecting the standard costs, nor the actual costs, of a product Nestle’, of course still has to pay the actual costs. As a result there almost always differences between the actual costs and the standard...
Words: 208048 - Pages: 833
...and maintain the cost of the inventory as well as purchase them based on reorder stock level. There are many forms of inventory systems, namely, Periodic, Perpetual, point order and many others. This document describes perpetual inventory system in detail. Perpetual Inventory system describes the process of monitoring and managing inventory where the sale of each product or goods is recorded as it is sold and inventory updated. The Accounting system records the transaction and updates the journals. This result in an updated inventory system in which the organization at any point knows how much of a product is present in inventory and how much has been sold. It also provides the organization with the value of the assets. Advantages of Perpetual system Advantages of Perpetual Inventory system are that a complete and reliable check on stores at any point can be obtained. While the inventory data is being collected, the company continues to work normally. Because the stock figures are directly connected to the accounting system, the Profit and Loss statement can be prepared immediately. Because of the perpetual system, the stocks can be kept within a prescribed limit, the stocks can be ordered real time and sale and purchase of stock can be obtained in real time. Disadvantages of Perpetual system Perpetual system is an expensive system to maintain as it requires many moving parts like RFID scanner or point of sale equipment’s. This kind of inventory system is usually used in a...
Words: 601 - Pages: 3
