FIFOsho
The balance sheet accoutn title for which FIFO is connected to primarily...
The balance sheet item which LIFO is connected is primarily this...
Merch Inventory
The method that is used if each inventory item can be matched with a specific purchase and invoice.
Specific Identification
What is the cost of inventory that's been sold?
cogs
Which financial statement is affected by ending inventory?
Balance Sheet
Given rising costs of materials over time, name this bottom line advantage FIFO has over LIFO
HIGHER GROSS PROFIT
What does LIFO stand for?
Last In First Out
The method that will cause the company to have the lowest income taxes.
LIFO
We are the seller, and it is FOB destination. How would we record $50 in shipping? (shipping is paid in cash)
COGS 50
Cash 50
Name 2 costs associated with COGS
shipping, merchandise, insurance, etc
With rising costs, FIFO impacts this Income Statement Category, which in turn, impacts Cost of Goods Sold and Gross Profits.
Ending Inventory
Given declining costs of materials over time, name this bottom line advantage LIFO has over FIFO
HIGHER GROSS PROFITS
The method that will cause the company to have the lowest cost of goods sold.
FIFO
1/1 - beg inv. - 10 units @ $10 each
1/15 - purchases - 5 units @20 each
1/30 - sales - 8 units @ 30 each
What is the merchandise available for sale on 1/20?
5 units @ $20
10 units @ 10
15 @ $200 in Merch. avail. for sale
Ending inventory is found by subtracting cost of goods sold from ____.
merchandise available for sale
Which financial statements are affected by inventory errors?
Both income statement and balance sheet
With declining costs, LIFO impacts this Income Statement Category, which in turn, impacts Cost of Goods Sold and Gross Profits.
What is Ending Inventory
The method that will tend to smooth out erratic changes in costs.
Weighted average
1/1 - beg inv. - 10 units @ $10 each
1/15 - purchases - 5 units @20 each
1/30 - sales - 8 units @ 30 each
What is the cost of goods sold using the FIFO method?
8 units @ $10
$80 in COGS
What must companies do if market value falls below cost?
Adjust inventory downward to lower of cost or market (LCM)
With inventory prices in Decline over time, this is a reason why a company would switch from LIFO to FIFO, to improve its Bottom Line performance.
What is LOWER TAXES - via higher ending inventory = lower COGS = lower gross (sales - cogs) and net profit.
What ratio shows how many times a company sells its inventory during a period?
Inventory turnover
The method that will cause the company to have the lowest net income.
LIFO
1/1 - beg inv. - 10 units @ $10 each
1/15 - purchases - 5 units @20 each
1/30 - sales - 8 units @ 30 each
What is the ending inventory using the LIFO method?
0 units @ $20
7 units @ $10
$70 in ending inventory
What is NRV and how is it calculated?
Net realizable value = sales price − selling costs