Best Teaching Practices 11 TH Annual Accounting Educators’ Seminar Linda Bell William Jewell College.

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Presentation transcript:

Best Teaching Practices 11 TH Annual Accounting Educators’ Seminar Linda Bell William Jewell College

Inventory Costing Demonstration Using Candy Inventory BI + P _____________________ GAS CGS _____________________ EI

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

Goods Available for Sale Assignment of Cost to Goods Sold and Ending Inventory Total Specific Identification Method Unit# ofCostCGSEI CostUnitsAvailable#$#$ BI$00 P1 P2 P3 GAS Totals $ 2 $ 3 $ $16 $21 $20 20 $ $ 8 $12 $ 9 $16$ $36 $21

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 FIFO) Outside

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$00 P1 P2 P3 GAS Totals $ 2 $ 3 $ $16 $21 $20 20 $ $ 16$ 0 $ 12 $ 9 $ 0$ $28 $29

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 LIFO) Outside

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$00 P1 P2 P3 GAS Totals $ 2 $ 3 $ $16 $21 $20 20 $ $ 0$ 16 $ 21 $ 0 $ 20$ $41 $16

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 Weighted Average) Outside

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 $ $34.20 $22.80 $57/20 = $ X $2.85 = $ X $2.85 = $22.80

So what?

SpecificWeighted Income Statement IdentificationFIFOLIFOAverage Sales (12 $_____) $$$$ Cost of Goods Sold Gross Profit Operating Expenses 10 Income before Taxes Income Tax Expense (assume 30%) Net Income $$$$ 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 :

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Thank you for your attention! Any Questions?