ACCTG 215 Notes 2-12
ACCTG 215 Notes 2-12 ACCTG 215
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This 1 page One Day of Notes was uploaded by Shogo Okuda on Tuesday October 28, 2014. The One Day of Notes belongs to ACCTG 215 at University of Washington taught by Wells in Winter2010. Since its upload, it has received 44 views. For similar materials see Introduction to Accounting and Financial Reporting in Accounting at University of Washington.
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Date Created: 10/28/14
ACCTG Notes 212 Raw materials vs Work in Process vs Finished Goods Inventory Cost Methods 1 Speci c identi cation method matches or identi es each unit of each inventory w its actual cost 2 Firstin FirstOut FIFO assume that the rst units purchased are the rst ones sold Companies are allowed to report inventory costs by assuming which unites of inventory are sold and not sold even if this does not match the actual ow Lastin rstout method LIFO assume that the last units purchased are the rst one sold 4 Average cost method assume that both COGS and ending inventory consist of a random mixture of all the goods available for sale Weighted average unit cost Cost of Goods Available for Sale of units available for sale FIFO results in 1 Higher ending inventory 2 Lower COGS 3 Higher reported pro t than LIFO FIFO balance sheet approach Primary bene t of choosing LIFO tax savings LIFO conformity rule requires a company that uses LIFO for tax reporting to also use LIFO for nancial reporting LIFO income statement approach LIFO reserve additional amount of inventory a company would report if it used FIFO instead of LIFO LIFO not allowed under IFRS Perpetual inventory system maintain a continual or perpetual record of inventory purchased and sold Periodic inventory system does not continually modify inventory amounts but instead periodically adjusts for purchases and sales of inventory at the end of the reporting period based on a physical count of inventory on hand Most companies track inventory using perpetual system but report inventory using periodic system FOB shipping point vs FOB shipping destination Freight in inventory cost Freight out not inventory cost Period end adjustment is needed only under the periodic system L Replacement cost lowerofcostormarket rule LCM Conservatism companies required to report the falling value of inventory but not allowed to report any increasing value of inventory Inventory turnover ratio COGSAverage Inventory Average Days in inventory 365Inventory turnover ratio Gross pro t ratio Gross Pro t Net Sales COGS and ending inventory do not differ depending on whether FIFO is computed using a periodic system or perpetual system Using LIFO the amounts reported for cost of goods sold and ending inventory differ depending on whether we use a periodic or a perpetual system Also true for average cost method