Differentiate between FIFO and LIFO. Ans 3.2 LIFO and FIFO are the 2 most common inventory valuation methods and affects both the balance sheet and income statement. LIFO: last out, or LIFO, calls for the firm to attribute any sale made to the most recently acquired and most expensive inventory. During the inflationary prices period, the firm using this method would have the highest cost of goods sold, the lowest net income and lowest inventory value. FIFO: First in, first out, or FIFO, refers to the
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GAAP 强制性规定 选择性规定 Balance Sheet Marketable Investment Securities Classified as held-to-maturity, trading and available-for-sale. LIFO, FIFO and the average cost method. Inventory Once an inventory write-down occurs, any subsequent recovery of value is ignored. Subsequent recovery of value can be included. Trading securities are known as held-for-trading securities. FIFO and the average cost method. IFRS 强制性规定 选择性规定 Case 1 Property and Equipment Don’t permit upward revaluations. Permit
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Chapter 7 Inventories: Cost Measurement and Flow Assumptions Classifications of Inventory Raw Materials Inventory – includes the tangible goods acquired for direct use in the productions process. Goods in Process Inventory – includes the products that have been started in the manufacturing process but have not yet been completed. The partially completed inventory includes three cost components: 1) raw materials 2) direct labor, which is the cost of the labor used directly in the
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be kept consistent when recording inventory so that it is fairly valued in accordance with the accounting method chosen such as, FIFO, LIFO, or weighted average method to determine the value of inventory. The inventory method chosen can results in different amounts for the cost of goods sold. Inventory detail can be an issue as it must be accurate related to FIFO and LIFO so when selling units the correct per price point is used for each method. Shrinkage costs can be an issue if the difference in
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One Global GAAP: IFRS vs. US GAAP Acct 522 Current Topics in Financial Reporting Zhipeng Cao CIN: 300443421 Introduction The most influential accounting reporting criteria today is the International Financial Reporting Standards (IFRS) by and U.S Generally Accepted Accounting Principles (U.S. GAAP). These two different accounting standards have various emphases. In short, IFRS states principles and it leaves the decision-making in everyday questions for accountants, while US GAAP consists
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does not matter how much greater the value is, we do not account for increases in value Methods of Inventory Valuation * FIFO (First In, First Out) – units purchased first are the ones to be sold first. Assigns most recent costs to inventory and older costs to COGS. This is the normal course of business – older units are always shipped first. * LIFO (Last In, First Out) – units purchased last are the ones to be sold first. Assigns most recent costs to COGS, and older costs to Inventory
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consists of three units from beginning inventory and eight from the June 12 purchase, and the June 27 sale consists of one unit from beginning inventory and fourteen units from the June 24 purchase. 2. Using FIFO, calculate ending inventory and cost of goods sold at June 30, 2012. 3. Using LIFO, calculate ending inventory and cost of goods sold at June 30, 2012.
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P/U 1/1/2013 BEG. INVENTORY 300 40 FIFO LIFO WEIGHTED AVERAGE 2/21/2013 PURCHASE 700 44 UNITS COST P/U TOTAL COST UNITS COST P/U TOTAL COST UNITS COST P/U TOTAL COST 3/28/2013 PURCHASE 800 50 300 40 12,000 300 40 12,000 300 40 12,000 SALE 1400 75 700 44 30,800 700 44 30,800 700 44 30,800 800 50 40,000 800 50 40,000 800 50 40,000 FIFO LIFO Weighted Average 1800 82,800 1800 82,800 1800
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$2,480 or (360 X $6.89). BE 6-5 (a) FIFO would result in the highest net income. (b) FIFO would result in the highest ending inventory. (c) LIFO would result in the lowest income tax expense (because it would result in the lowest net income). (d) Average-cost would result in the most stable income over a number of years because it averages out any big changes in the cost of inventory. BE 6-6 Cost of goods sold under: | | | LIFO | | FIFO | | Purchases | | $6 X 100 | | $6 X
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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
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