Post on 24-Dec-2015
transcript
Inventory Costing Demonstration
Inventory
M&M Store
Purchases:1) 8 Brown/Red ($2 each) 2) 7 Blue/Green ($3 each)3) 5 Yellow/Orange ($4 each)
20 Total M&Ms
Sold: 12 ($5 Sales Price)(Assume 4 of each
group)
Outside
M&M Store Outside
Goods Available for Sale Assignment of Cost to Goods Sold and Ending Inventory
Total Specific Identification Method
Unit # of Cost CGS EI
Cost Units Available # $ # $
BI
P1
P2
P3
GAS Totals
FIFO Cost Flow Assumption
Goods Available for Sale Assignment of Cost to Goods Sold and Ending Inventory
Total First-In, First-Out (FIFO) Method
Unit # of Cost CGS EI
Cost Units Available # $ # $
BI
P1
P2
P3
GAS Totals
LIFO Cost Flow Assumption
Goods Available for Sale Assignment of Cost to Goods Sold and Ending Inventory
Total Last-In, First-Out (LIFO) Method
Unit # of Cost CGS EI
Cost Units Available # $ # $
BI
P1
P2
P3
GAS Totals
Goods Available for Sale Assignment of Cost to Goods Sold and Ending Inventory
Total Weighted Average Method
Unit # of Cost CGS EI
Cost Units Available # $ # $
BI $0 0 $0
P1
P2
P3
GAS Totals
$ 2
$ 3
$ 4
8
7
5
$16
$21
$20
20 $57 12 8
So what?
Specific Weighted
Income Statement Identification FIFO LIFO Average
Sales (12 units @ $_____) $ $ $ $
Cost of Goods Sold
Gross Profit
Operating Expenses
Income before Taxes
Income Tax Expense (assume 30%)
Net Income $ $ $ $
Her
e’s
Wh
at
There’s more…
Specific Weighted
Balance Sheet Identification FIFO LIFO Average
Current Assets:
Inventory (Ending) $ $ $ $
Stockholders' Equity:
Retained Earnings $ $ $ $
Specific Weighted
Statement of Cash Flows Identification FIFO LIFO Average
Cash paid for income taxes $ $ $ $
(Assume all income taxes were paid)
And
finall
y…
The reality is that in all cases 20 pieces of candy were purchased and 12 were sold. The different financial results are merely cosmetic.
Conclusion: