example of valuation methods of accounting principles that evaluate the value of inventory are the FIFO and LIFO method. There are several differences between FIFO and LIFO approach‚ so it can be two different balances for the same inventory depending on the valuation method. Therefore‚ a financial statement can be affected dramatically by switching form FIFO to LIFO. When switching from FIFO to LIFO‚ an entity needs to consider whether it is essential to restate its financial data for previous years
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the first-in‚ first-out method (FIFO)‚ the first units purchased are assumed to be the first ones sold. True 9. False Companies are not allowed to report inventory costs by assuming which units of inventory are sold and which units still remain on hand. True 8. False If a company has ending inventory of $25‚000‚ purchases during the year of $95‚000‚ and beginning inventory of $30‚000‚ cost of goods sold equals $90‚000.
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The Comparative Analysis of Financial Reporting Between China and the UK Introduction As commonly acknowledged‚ accounting‚ as a social science‚ a language of economy‚ is affected by the environment in which it stays; In the meantime‚ it also brings impact on this environment (Černe 2009). There are numerous factors that affect the accounting system of a country‚ such as culture‚ politics and economy and other non-accounting factors (Nobes & Parker 2010). China is one of the most populous
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re-establishing manufacturing operations in Nashua. Thus‚ the company controller suggested a change in the accounting process from LIFO to FIFO system for inventory accounting. A change such as this would require additional disclosures in the notes of the financial statement. Need for Change The company has decided to change its inventory accounting method from LIFO to FIFO as this will increase the profit by reducing the Cost of Goods sold. As the inventory gets consumed‚ the 1|Page valuation
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lower-of-cost-or-market‚ inventory turnover‚ days? sales in inventory‚ and LIFO reserve. 2. Know how to compute the cost of ending inventory and the cost of merchandise sold using FIFO‚ LIFO‚ and average cost. 3. What is the cost of merchandise available for sale? 4. Know the effect on cost of ending inventory and cost of merchandise sold when using FIFO‚ LIFO‚ and average cost when prices are increasing. Which one‚ FIFO or LIFO‚ gives the higher cost of merchandise sold and which one the
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Chapter 3 Overview of Accounting Analysis 1 Preliminary Topics • Institutional Framework of Financial Reporting includes: (1) Income Statement‚ (2) Balance Sheet and (3) Cash Flow Statement. Balance Sheet analysis: Building Blocks of assets‚ liability‚ debt & equity. Equity=Assetsliability. Book value vs. market value of share. • Corporate financial report is prepared on accrual basis rather than cash basis. Accrual implies economic activities rather than true payment and receipts. • A Responsibility
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transactions are related to Parashanlal Merchandizing Company. Income Tax is 10%; operating expenses are Rps 10‚000. Compute Net Income‚ and calculate the value of inventory remaining at the end of the month using the following methods: 1 LIFO 2 FIFO 3 Weighted Average Method No. | Date | Particulars | 01 | Jan 01 | Rps 100‚000 worth of inventory remaining from last years‚ which was bought at Rps 50 per KG. | 02 | Jan 01 | Bought 3000 Kg at Rps 60 per kg. | 03 | Jan 02 | Bought
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counterproductive in 2009‚ as the prices continue to rise. What approach (FIFO or LIFO) and why would you recommend to Merrimack Mowers if inventory purchase prices and transportation costs had been stable of falling over the two-year period? (For example‚ if Merrimack were a computer assembly firm). Considering available options it can be seen that the business will become unviable right from 2008 onwards. Hence the company should move to FIFO method of accounting for inventory. This move though has to be
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Case：Sears‚ Roebuck and Co. vs. Wal-Mart Stores‚ Inc. Financial Statement Case analysis 1． How do the retailing strategies of Sears and Wal-Mart differ? How does each firm operate their business/attempt to create value? The two companies differs in retailing strategy in two ways. 1. Credit sales boost sales greatly in Sears‚ not in Wal-mart Since 1992 when Arthur C. Martinez was brought on board to head Sears’s retailing operations‚ credit sales‚ especially through the use of the
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CHAPTER 7 Inventory LEARNING OBJECTIVES 1. Identify what items and costs should be included in inventory and cost of goods sold. 2. Account for inventory purchases and sales using both a perpetual and a periodic inventory system. 3. Inventory is composed of goods held for sale in the normal course of business. Cost of goods sold is the cost of inventory sold during the period. For a manufacturing firm‚ the three types of inventory are raw materials‚ work in process‚ and
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