Inventory Flashcards
Periodic LIFO system
In periodic LIFO, if beg and ending inventory have the same number of units, the amount purchased will be equal to CGS.
Is the EI different if a company uses periodic FIFO versus perpetual FIFO?
Because the first goods acquired are not impacted by subsequent purchases, FIFO systems always arrive at the same CGS and EI regardless of whether a perpetual or a periodic system is in use.
Inventory Turn Over
CGS/Average Inventory
Just In Time
An inventory strategy implemented to improve ROI by reducing in-process invty and lowering invty carrying costs
Number of days’ sales in average inventories
Ave sales per day at cost
Number of days sales in ave inventories
(CGS / 360 days)
Purchase Commitments
Dr Est loss on PC
Cr Accrued loss on PC
Dr Purchases
Dr Accrued loss on PC
Cr Cash
LIFO Reserve account
When a company uses LIFO for external reporting purposes and another invty method for internal purposes, a LIFO Reserve account is used to reduce invty from the internal valuation to the LIFO valuation. LIFO Reserve is a contra-account to invty, and is adjusted up or down at year end with a corresponding increase or decrease to CGS.
LIFO Conformity rule
If LIFO is used for tax purposes, it must also be used for external financial reporting purposes.
Unit LIFO vs Dollar-value LIFO
Like unit LIFO, dollar-value LIFO is a layering method. Unlike unit LIFO, dollar-value LIFO determines increases or decreases in ending invty in terms of dollars of the same purchasing power rather than in terms of units. Dollar-value LIFO seeks to determine the real dollar change in invty.
Dollar-value CPI
EI at base year prices
Number of days’ supply in ave invty OR Ave days’ sales in invty
Invty turnover (CGS/Ave invty)
Percentage of completion
Revenue (profit) = (Cost to date
————
Total expected co
