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ACC E113 Lecture Notes - Lecture 27: Weighted Arithmetic Mean, International Financial Reporting Standards, Barcode

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rubyporpoise450
30 Jul 2020
School
HCC
Department
Accounting
Course
ACC E113
Professor
Albaz

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Document Summary

When inventory costs change, the determination of the cost of sales and the cost of ending inventory can turn net earnings into losses (and vice versa) and cause companies to pay or save millions in taxes. Three generally accepted inventory costing methods are available to determine the cost of sales average method used be rational and systematic of goods available for sale between (1) ending inventory and (2) cost of sales. 1) specific identification 2) first-in, first-out (fifo) and 3) weighted. The three inventory costing methods are alternative ways to assign the total cost. International accounting standard 2 requires only that the inventory costing. The selected inventory costing method should be the one that provides the. Specific identification identifies individual items that remain in inventory or. First-in, first-out and weighted average assume that inventory items. When this method is used, the cost of each item sold is individually identified.

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Related Questions

PA7-1 Analyzing the Effects of Four Alternative Inventory Methods in a Periodic Inventory System [LO 7-3]

Gladstone Company tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each period, as if it uses a periodic inventory system. Assume its accounting records provided the following information at the end of the annual accounting period, December 31.


Transactions Units Unit Cost
Beginning inventory, January 1 1,600 $ 45
Transactions during the year:
a. Purchase, January 30 2,300 49
b. Sale, March 14 ($100 each) (1,250 )
c. Purchase, May 1 1,000 75
d. Sale, August 31 ($100 each) (1,500 )


Assuming that for Specific identification method (item 1d) the March 14 sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of January 30. Assume that the sale of August 31 was selected from the remainder of the beginning inventory, with the balance from the purchase of May 1.


Required:
1.

Compute the amount of goods available for sale, ending inventory, and cost of goods sold at December 31 under each of the following inventory costing methods: (Round intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount.)




2-a. Of the four methods, which will result in the highest gross profit?
Last-in, first-out
Weighted average cost
First-in, first-out
Specific identification


2-b. Of the four methods, which will result in the lowest income taxes?
Last-in, first-out
Weighted average cost
First-in, first-out
Specific identification

Oahu Kiki tracks the number of units purchased and sold throughout each accounting period but applies its inventory costing method at the end of each month, as if it usees a periodic inventory system. Assume Oahu Kiki's records how the following for the month of January. Sales totaled 330 units. Dates Units Unit Cost Total Cost Beginning Inventory January 1 Units 300 Unit Cost $90 Total Cost $27,000 Purchase January 15 Units 400 Unit Cost 100 Total Cost 40,000 Purchase January 24 Units 300 Unit Cost 120 Total Cost 36,000 Required: 1. Calculate the number and cost of goods available for sale Number of Goods Available for Sale Cost of Goods Available for Sale 2. Calculate the number of units in ending inventory. Ending Inventory units 3. Calculate the cost of ending inventory and cost of goods sold using the (a) FIFO, (b) LIFO, and (c)weighted average cost methods. Cost of Ending Inventory FIFO, LIFO, Weighted Average Cost Cost of Goods Sold FIFO, LIFO, Weighted Average Cost

Smiller Company uses a periodic inventory system. At the end of the annual accounting period, December 31, 2010, the accounting records for the most popular item in inventory showed the following:

Required:

Compute the cost of goods available for sale (a), cost of ending inventory (b), cost of goods sold (c) at December 31, 2010, under each of the following inventory costing methods. (show solutions and round to the nearest dollar)

1. Weighted average cost

2. First-in, first-out

3. Last-in, first-out

4. Specific identification, assuming that the first sale was selected two-fifths from the beginning inventory and three-fifths from the purchase of February 20, 2010. Assume that the second sale was selected from the remainder of the beginning inventory, with the balance from the purchase of June 30, 2010.