AN EXAMINATION OF INVENTORY COSTING CONVERGENCE UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND INTERNATIONAL FINANCIAL REPORTING STANDARDS Casey Reineking Department of Accounting Murray State University Murray, KY 42071-3314 E-mail: casey.reineking@hotmail.com Don H. Chamberlain Department of Accounting Murray State University Murray, KY 42071-3314 Holly R. Rudolph Department of Accounting Murray State University Murray, KY 42071-3314 L. Murphy Smith* Department of Accounting Murray
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Gary Varnell Capella University MBA 6014 Financial Accounting Professor Laurent Bobda Introduction Net income results, reported in the financial statement presentation, can be affected by the inventory reporting methods used. First-In, First-Out (FIFO), Last-In, First-Out (LIFO,) and weighted average methods each have their own implications during periods of inflation and deflation. This paper is designed to analyze and discuss the Generally Accepted Accounting Practices (GAAP) and ethical implications
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Inventory methods go back to the times of the first recorded businesses, First in First out method or FIFO, is commonly accepted over all accounting standards; however, the antithesis of FIFO is not as easily agreed upon. Last in First Out method, was ruled as not an acceptable accounting method for valuation of inventories in 1930 by the Supreme Court. This was after issues with many companies seeing LIFO as the most accurate way to valuate their inventories, which caused many law suites and lead
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| |FIFO |LIFO |Average Cost | |Sale |730,000 |730,000 |730,000 | |Beginning Inventory |120,000 |120,000 |120,000 | |Purchases |360,000 |360,000
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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
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to record a change in depreciation methods. c 26. Disclosures required for a change in depreciation methods. c 27. Change from percentage-of-completion to completed-contracts. d 28. Disclosures required for a change from LIFO to FIFO. b 29. Change from FIFO to LIFO. c 30. Change in accounting estimate. a 31. Change in accounting estimate. b 32. Identify a change in accounting estimate. b 33. Change in accounting estimate. c 34. Identify a change in accounting estimate. d 35. Identify
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Name] [Writer’s Name] [Course] [Date] Week 3 - DQs 1. LIFO vs. FIFO The controller of Sagehen Enterprises believes that the company should switch from the LIFO method to the FIFO method. The controller’s bonus is based on the next income. It is the controller’s belief that the switch in inventory methods would increase the net income of the company. What are the differences between the LIFO and FIFO methods? Guided Response: Analyze several of your peers’
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computer retailer, has historically used FIFO for valuing its inventory. In the last few years, Bobby's business has become quite profitable and Bobby's accountant suggests that Bobby switch to the LIFO inventory system to minimize the taxable income. According to the consistency principle, Bobby can change the accounting methods for a justifiable reason for example like minimizing taxes is an acceptable reason is debatable. Assume Bobby's Computers switched from FIFO to LIFO in year 2. In year 3, Bobby's
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operating aspects of the business.Edward Drewery Controller for Morgan ManufacturingCompetitor of Morgan Manufacturing 5. Morgan ManufacturingMorgan Manufacturing uses LIFO as its inventory costing method and provides the LIFO reserve.Westwood uses FIFO as its inventory costing method.Events and Facts: Morgan OperationsProductivity ImprovementsFinancial StatementsComparison of Operating PerformanceOver 2006, Morgan Manufacturing implemented significant productivity improvements over Westwood.Morgan
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P6-1A Kirk Limited is trying to determine the value of its ending inventory as of February 28, 2012, the company’s year-end. The accountant counted everything that was in the warehouse, as of February 28, which resulted in an ending inventory valuation of $48,000. However, she didn’t know how to treat the following transactions so she didn’t record them. Determine items and amounts to be recorded in inventory. (SO 1), AN (a) On February 26, Kirk shipped to a customer goods costing $800. The goods
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