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© Copyright 2011 by M. Ray Gregg. All Rights Reserved. 1.

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1 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 1

2 2 P EI BI Importance of Inventory COGSCOGS GAFS To Balance Sheet To Income Statement

3 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 3 in order expenditures were made -- FIFO in reverse order in which expenditures were made - - LIFO average of expenditures

4 4 Balance SheetIncome Statement MICOGS First In … First OUT Latest Items Left Over Time Time Time Time Time Time Time Time Time

5 5 Balance SheetIncome Statement MICOGS Last In First OUT Oldest Items Left Time Time Time Time Time Time Time Time Time

6 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 6 Balance SheetIncome Statement MICOGS FIFO LIFO Rising Prices NI Time Time Time Time Time Time Time Time Time

7 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 7 January December Assumption

8 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 8 FIFO ????

9 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 9 FIFO ????

10 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 10 LIFO ????

11 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 11 LIFO ????

12 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 12 Looking for what? Ending Inventory Cost of Goods Sold Which Method?

13 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 13 Balance SheetIncome Statement MICOGS First In … First OUT Latest Items Left Over Time Time Time Time Time Time Time Time Time

14 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 14 COGS EI FIFO

15 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 15 Looking for what? Ending Inventory Cost of Goods Sold Which Method?

16 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 16 Balance SheetIncome Statement MICOGS Last In First OUT Oldest Items Left Time Time Time Time Time Time Time Time Time

17 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 17 EI COGS LIFO

18 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 18

19 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 19 In its first month of operations, AC Company made three purchases of merchandise in the following sequence: 300 units @ $6 400 units @ $7 300 units @ $8 Assuming there are 450 units on hand, compute the cost of the ending inventory and cost of goods sold under the (1) FIFO method, (2) LIFO method, and (3) average method. AC Company uses a periodic inventory system.

20 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 20 In its first month of operations, AC Company made three purchases of merchandise in the following sequence: 300 units @ $6 400 units @ $7 300 units @ $8 Assuming there are 450 units on hand, compute the cost of the ending inventory and cost of goods sold under the (1) FIFO method, (2) LIFO method, and (3) average method. AC Company uses a periodic inventory system. Rising Prices? $6 $7 $8

21 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 21 Balance SheetIncome Statement MICOGS FIFO LIFO Rising Prices NI Time Time Time Time Time Time Time Time Time ?? ?? ??

22 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 22 Balance SheetIncome Statement MICOGS FIFO LIFO Rising Prices NI Time Time Time Time Time Time Time Time Time

23 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 23 In its first month of operations, AC Company made three purchases of merchandise in the following sequence: 300 units @ $6 400 units @ $7 300 units @ $8 Assuming there are 450 units on hand, compute the cost of the ending inventory and cost of goods sold under the (1) FIFO method, (2) LIFO method, and (3) average method. AC Company uses a periodic inventory system.

24 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 24

25 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 25

26 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 26

27 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 27

28 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 28

29 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 29

30 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 30 Find EI using FIFO. ? ?

31 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 31 Looking for what? Ending Inventory Cost of Goods Sold Which Method?

32 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 32 COGS EI FIFO

33 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 33 Find EI using FIFO. ? ?

34 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 34 EI under FIFO

35 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 35 EI under FIFO

36 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 36 EI under FIFO

37 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 37 Balance SheetIncome Statement MICOGS FIFO LIFO Rising Prices NI Time Time Time Time Time Time Time Time Time $3,450

38 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 38 In its first month of operations, AC Company made three purchases of merchandise in the following sequence: 300 units @ $6 400 units @ $7 300 units @ $8 Assuming there are 450 units on hand, compute the cost of the ending inventory and cost of goods sold under the (1) FIFO method, (2) LIFO method, and (3) average method. AC Company uses a periodic inventory system.

39 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 39 P EI BI COGS GAFS

40 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 40 EI under FIFO Cost of Goods Sold

41 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 41 EI under FIFO Cost of Goods Sold

42 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 42 EI under FIFO Cost of Goods Sold

43 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 43 EI under FIFO Cost of Goods Sold Prove it!

44 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 44 Find EI using FIFO. ? ? Cost of Goods Sold

45 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 45 Looking for what? Ending Inventory Cost of Goods Sold Which Method?

46 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 46 EI under FIFO Cost of Goods Sold

47 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 47 EI under FIFO Cost of Goods Sold

48 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 48 EI under FIFO Cost of Goods Sold

49 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 49 EI under FIFO Cost of Goods Sold

50 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 50 Balance SheetIncome Statement MICOGS FIFO LIFO Rising Prices NI Time Time Time Time Time Time Time Time Time $3,450 $3,550

51 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 51 In its first month of operations, AC Company made three purchases of merchandise in the following sequence: 300 units @ $6 400 units @ $7 300 units @ $8 Assuming there are 450 units on hand, compute the cost of the ending inventory and cost of goods sold under the (1) FIFO method, (2) LIFO method, and (3) average method. AC Company uses a periodic inventory system.

52 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 52

53 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 53 Find EI using LIFO. ? ?

54 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 54 Looking for what? Ending Inventory Cost of Goods Sold Which Method?

55 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 55 EI COGS LIFO

56 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 56 Find EI using LIFO. ? ?

57 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 57 EI under LIFO

58 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 58 EI under LIFO

59 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 59 EI under LIFO

60 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 60 Balance SheetIncome Statement MICOGS FIFO LIFO Rising Prices NI Time Time Time Time Time Time Time Time Time $3,450 $3,550 $2,850

61 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 61 EI under LIFO Cost of Goods Sold

62 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 62 EI under LIFO Cost of Goods Sold

63 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 63 EI under LIFO Cost of Goods Sold Prove it!

64 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 64 Find EI using LIFO. ? ? Cost of Goods Sold

65 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 65 Looking for what? Ending Inventory Cost of Goods Sold Which Method?

66 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 66 EI under LIFO Cost of Goods Sold

67 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 67 EI under LIFO Cost of Goods Sold

68 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 68 EI under LIFO Cost of Goods Sold

69 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 69 EI under LIFO Cost of Goods Sold

70 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 70 Balance SheetIncome Statement MICOGS FIFO LIFO Rising Prices NI Time Time Time Time Time Time Time Time Time $3,450 $3,550 $2,850 $4,150

71 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 71 In its first month of operations, AC Company made three purchases of merchandise in the following sequence: 300 units @ $6 400 units @ $7 300 units @ $8 Assuming there are 450 units on hand, compute the cost of the ending inventory and cost of goods sold under the (1) FIFO method, (2) LIFO method, and (3) average method. AC Company uses a periodic inventory system.

72 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 72

73 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 73 EI under AVERAGE

74 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 74 Find the AVERAGE: GAFS units =

75 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 75 Find the AVERAGE: GAFS units = $7,000 1,000

76 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 76 Find the AVERAGE: GAFS units = $7,000 1,000 =$7.00

77 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 77 P EI BI Use AVERAGE for BOTH COGSCOGS GAFS Average to Balance Sheet Average to Income Stmt

78 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 78 EI under AVERAGE

79 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 79 Balance SheetIncome Statement MICOGS FIFO LIFO Rising Prices NI Time Time Time Time Time Time Time Time Time $3,450 $3,550 $2,850 $4,150

80 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 80 EI under AVERAGE Cost of Goods Sold

81 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 81 EI under AVERAGE Cost of Goods Sold

82 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 82 EI under AVERAGE Cost of Goods Sold Prove it!

83 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 83 EI under AVERAGE Cost of Goods Sold

84 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 84 P EI BI Use AVERAGE for BOTH COGSCOGS GAFS Average of $7 to Balance Sheet Avg of $7 to Income Stmt

85 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 85 Balance SheetIncome Statement MICOGS FIFO LIFO Rising Prices NI Time Time Time Time Time Time Time Time Time $3,450 $3,550 $2,850 $4,150

86 © Copyright 2011 by M. Ray Gregg. All Rights Reserved. 86

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