inventory of 6‚000 units on the basis of average cost method is $21‚300. b. First-in‚ first-out (FIFO): under FIFO the goods available for sale is sold first. The cost of goods sold of 7‚000 units is calculated as under: 5‚000 units will be valued at the rate of $3.23 and the remaining 2‚000 will be valued at the rate of $3.50 from the lot purchased on 16th September. The cost of goods sold under FIFO is $23‚150. The cost of ending inventory of 6‚000 units will be valued at the rate of purchases
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standards in Europe which demand ‘first-in first-out’ (FIFO) methodology for accounting inventory. Most US companies however produce based on ‘last-in first-out’ (LIFO) accounting. Shell’s current cost of supply (CCS)‚ however‚ are neither FIFO nor LIFO compliant. This means that Shell’s CCS figure are not recognized by US GAAP or IFRS. They are an industry measure only provided for in quarterly results for the benefit of investors. Instead of the FIFO method‚ Shell uses a weighted cost pricing methodology
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natural gas‚ and petroleum products. NOTES TO FINANCIAL STATEMENTS Inventories. Crude oil‚ products‚ and merchandise inventories are carried at the lower of current market value or cost (generally determined under the last-in‚ first-out method – LIFO). Inventory costs include expenditures and other charges (including depreciation) directly and indirectly incurred
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merchandise sold 2660 * Merchandise inventory 2660 Sales 3900 Cost of merchandise sold 2660 Gross profit 1240 Ending inventory 3220 Inventory system 1. Perpetua: record sales and cost of merchandise sold uses FIFO LIFO 2. Periodic: records sales only FIFO LIFO and average CMS=MAFS-EI * Perpetual inventory * a/r 200 * sales 200 * CMS 80 * Merchandise inventory 80 Periodic inventory only sales recorded when inventory is sold. CMS is determined
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Revenue $35‚000-Cost of Goods $15‚000=$20‚000 Gross Profit c. ending inventory. $21‚800 (sunset)+ $31‚200 (earth)=$53‚000 (ending inventory) 2. Inventory valuation methods: basic computations. 3. Perpetual inventory system: journal entries. a. FIFO • 1/2/20X3 Purchases on account: 500 units @ $6 = $3‚000 Dr Merchandise Inventory 2‚000 Cr Accounts Payable 2‚000 • 1/15/20X3 Sales on account: 300 units @ $8.50 = $2‚550 Dr Accounts Receivable 2‚550 Cr Sales 2‚550 Dr Cost of Goods Sold 1
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had used FIFO to value its inventories c. Calculate inventory turnover for the year using the reported numbers. a. Whole Foods Market values their inventories at the lower of cost or market. They use the last-in‚ first-out (“LIFO”) method to determine the cost. It was used for approximately 93.6% and 94.0% of inventories in fiscal years 2009 and 2008‚ respectively. b. Cost of sales for the year under FIFO would have been: * COGS (FIFO) = COGS (LIFO) – change in LIFO reserve
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Financial Statement Analysis K R Subramanyam John J Wild McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies‚ Inc. All rights reserved. 4-2 Analyzing Investing Activities 4 CHAPTER 4-3 Current Asset Introduction Classification Current (Short-term) Assets Resources or claims to resources that are expected to be sold‚ collected‚ or used within one year or the operating cycle‚ whichever is longer. Noncurrent (Longterm) Assets Resources or claims to resources
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switched from FIFO to LIFO in accounting for inventory. The preceding year it had switched from the weighted-average method to FIFO. I think it is conflict with accounting theory. First‚ accounting method should not be changed year to year. The company should apply for changing the accounting method by giving some reasonable reasons. After permitted‚ the company can change the method. But it should be indicated. Second‚ if the company uses LIFO for tax purposes‚ it must also use LIFO for financial
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Financial Accounting Under the FIFO cost flow assumption during a period of inflation‚ which of the following is false? WHICH OF THE FOLLOWING IS NOT TRUE. (Hint: One way to answer this is to look at examples of lifo and fifo). Choose one answer. a. Income tax expense will be higher than under LIFO. b. Gross margin will be higher than under LIFO. c. Ending inventory will be lower than under LIFO. d. Cost of goods sold will be lower than under LIFO. e. All of the above are
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perpetual system. With a perpetual system‚ a running count of goods on hand is maintained at all times. The perpetual inventory method is not a physical check of inventory but rather a recording of changes in inventory when sales transactions occur. The FIFO method‚ which is explained later‚ will produce the same financial statement results no matter whether it is applied on a periodic or perpetual basis. This occurs because the beginning inventory and early purchases are taken away and charged to the
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