is based on the average cost of items available for sale during a period. 3) Perpetual method is the most accurate and is widely used. With this method inventory is kept count at all times. 4) FIFO or first-in, first-out, use the cost of beginning inventory or oldest inventory to base calculations on. 5) LIFO or last-in, first-out bases the calculation of cost of the item on the last item purchased. This method is often used to cut tax cost assuming the last item bought was more costly. Many items
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Ending Inventory = 1375 – 1100 = 275 units FIFO Ending Inventory = (110 x 28) + (165 x 24) = 3080 + 3960 = $7040 Cost of goods sold= 31295 – 7040 = $24255 LIFO Ending Inventory = (165 x 18) + (110 x 22)
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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
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December 31, 2014; and $181,366 at December 31, 2015. The year-end price indexes were 100 at 12/31/13, 113 at 12/31/14, and 118 at 12/31/15. Brief Exercise 8-8 Brief Exercise 8-9 Your answer is correct. Arna, Inc. uses the dollar-value LIFO method of computing its inventory. Data for the past 3 years follow. Brief Exercise 8-9 2014 inventory at base amount ($22,363 ÷ 1.07) $20,900 2013 inventory at base amount (20,000 )
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1, 2, 3 Concepts for Analysis 1, 2, 3, 5, 11 2. 3. 4. 5. 2 9, 13, 14, 17 7, 8 2, 3, 4, 5, 10, 11, 12 13, 14, 15, 16, 17, 18, 19, 20, 21, 22 18 4, 5, 6 3 2 1, 4, 5, 6, 7 5, 6, 7, 8 4 6. 7. Inventory accounting changes. Dollar-value LIFO methods. 14, 15, 17, 18, 19 8, 9 7 1, 8, 9, 10, 11 6, 7, 10 8, 9 23, 24, 25, 26 8-1 ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE) Learning Objectives 1. 2. 3. 4. 5. Identify major classifications of inventory. Distinguish
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2002. Its address is 3701 Commerce Drive, Baltimore, MD 23239. Its employer identification number is 69-7414447. It elects to file its initial tax return for 2002 as a calendar-year corporation and uses the accrual method of accounting. It elects the LIFO method of inventory valuation. Jason Sprull (SSN 333-33-3333) and Martin Winsock (SSN 555-55-5555) formed the business. They each contributed $250,000 cash for 50 percent of the 100,000 shares of $1 par value stock issued and outstanding. The
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Assisnment PrintView Page of 12 I C*N,WL awar0: 4 t . 10 points priceof purchased with an invoice taos Company merchandise resalefrom TusconCompany for Taospaidwithin the n160. merchandise costTuscon The had and termsof 2110, $14,322. $21,000 credit period. inventory system. Assume bothbuyer seller a perpetual that and use discount (Omit the "$" sign in your l(a)Prepare entriesthat the buyershouldrecordfor the purchase. response.) General Journal Merchandise inventory payable lAccounts
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GAAP: Concerns about LIFO General accepted accounting principles (GAAP) allows the use of LIFO (Last-in First-out) under ASC 330-10-30-9 to determine inventory costs. However, IFRS (International Financial Reporting Standards) does not allow the use. Many companies choose to use the LIFO method because it allows the higher value inventory to be included into the cost of sales. This results in a smaller profit margin that further results in less tax. IFRS doesn’t allow the use of LIFO for the same reason
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assumption of (1) average cost, (2) FIFO, (3) LIF0. Average cost: units sold without regard to the order in which they are purchased and computes COGS and ending inventories as simple weighted average. FIFO: the first units purchased are the first units sold. These units are the units on hand at the beginning of the period. LIFO: the last units purchased are the first to be sold. b. Discuss management’s usual reason for using LIFO as inflationary economy. The use of LIFO can reduce or delay tax payments
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Name Financial Accounting Instructor Kimmel, Weygandt, & Kieso Section # Date |Part |I |II |III |IV |V |Total | |Points |45 |25 |12 |10 |8 |100 | |Score | | | | | | | PART I — MULTIPLE CHOICE (45 points) Instructions Designate the best answer for each of the following questions
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