chapter 5 notes Flashcards
are damaged out of date goods reported in inventory if they cant be sold
no
net realized value
sales price - discount price + other cost
companies take phsyical account of inventory that adjust inventory account balance to what
actual inventory available
FIFO
-assumes cost flow in order incurred
-when sales occur cost of earliest units acquired are charged to cost of goods solf
LIFO
-more recent costs are charged to COGS
-cost of early ourchases assigned to inventory
-assumes flow in reverse order incurred
weighted average
-assumes cost flow at avg cost available
-cost per unit = cost of sale divided by units available
lifo in rising costs
reports highest cost of good sold, yields lowest gross profit + net income
FIFO in rising costs
reports lowest cost of good sold, yields highest gross profit and net income
weighted average in rising costs
yields results between FIFO and LIFO
falling costs for LIFO, FIFO and weighted average
reverse of rising
FIFO method advantages
inventory ~~ its current costs, follows actual flow of goods for most businesses
LIFO method advatages
COGS ~~ current costs, better matches current costs with revenues
weighted average method advatages
smooths out erratic changes in costs
decline in market value =
loss of inventory
when market value is lower than inventory what is recorded
loss
