AFM101 Lecture 8: AFM 101 Fall 2014 In class problems week 8

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM101
• Professor: Grace Loney

Document Summary

*units sold = 3,000 + 12,000 2,700 = 12,300. Average: cost of goods available for sale [(3,000 units @ ) + (12,000 units. = ,000 15,000 units = . 40 per unit. Weighted average may be preferred for income tax purposes because it reports less taxable income (when prices are rising) and hence reduces income tax and cash outflows for the period. When prices are falling, the use of weighted average cost produces higher net earnings (compared to fifo) because fifo allocates the old (higher) unit costs to cost of sales first. However, fifo may be preferred for income tax purposes because it reports less taxable income than the weighted average cost method. If the lcnrv rule is applied on an item-by-item basis, the value of ending inventory will be ,075. If the lcnrv rule is applied per major category, the value of ending inventory will be.