Chapter 6 Flashcards
The type of income statement that reports a series of subtotals such as gross profits, operating income, and income before taxes is called a..
Multiple-Step Income Statement
How do you find COGS?
Beg. Inventory + Purchases - End. Inventory
How do you find Gross Profits?
Net Sales-COGS
How do you find Net Revenue?
Total Sales Rev - Sales Discounts - Sales Returns
How do you find Ending Inventory using FIFO?
Subtract middle unit amounts then multiple by the first middle price. Then add the middle amount with the last amount (multiple last unit with the last price)
How do you find Ending Inventory using LIFO if units were sold during the month?
Subtract units sold by the first unit amount. Then multiple that amount by the first price
How do you find COGS using LIFO if units were sold during the month?
Subtract units sold by the last unit amount. Then multiple that amount by the first price. We’ll call this total A.
Multiple the last unit amount by the last price. We’ll call this total B
Add A with B
How do you find COGS using weighted-average cost if units were sold during the month?
Multiple the first unit with it’s respective price.
Multiple the second unit with it’s respective price.
Add both amounts before dividing total units (add first and last units) to get weighted average cost.
Multiple that cost by the units sold amount.
When costs are RISING, FIFO has…
LOW COGS, HIGH Ending Inventory, HIGH Gross Profit
When costs are RISING, LIFO has..
HIGH COGS, LOW Ending Inventory, LOW Gross Profit
When costs are DECREASING,FIFO has…
HIGH COGS, LOW Ending Inventory, LOW Gross Profit
When costs are DECREASING, LIFO has…
LOW COGS, HIGH Ending Inventory, HIGH Gross Profit
Inventory Turnover ratio measures…
The times per period the average inventory balance is sold
