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.

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Presentation 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# ofCostCGSEI CostUnitsAvailable#$#$ 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# ofCostCGSEI CostUnitsAvailable#$#$ 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# ofCostCGSEI CostUnitsAvailable#$#$ BI P1 P2 P3 GAS Totals

Goods Available for Sale Assignment of Cost to Goods Sold and Ending Inventory Total Weighted Average Method Unit# ofCostCGSEI CostUnitsAvailable#$#$ BI$00 P1 P2 P3 GAS Totals $ 2 $ 3 $ $16 $21 $20 20 $

So what?

SpecificWeighted Income Statement IdentificationFIFOLIFOAverage Sales (12 $_____) $$$$ Cost of Goods Sold Gross Profit Operating Expenses Income before Taxes Income Tax Expense (assume 30%) Net Income $$$$ Here’s What

There’s more… SpecificWeighted Balance Sheet IdentificationFIFOLIFOAverage Current Assets: Inventory (Ending)$$$$ Stockholders' Equity: Retained Earnings$$$$

SpecificWeighted Statement of Cash Flows IdentificationFIFOLIFOAverage Cash paid for income taxes$$$$ (Assume all income taxes were paid) And finally…

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 :