ACCTNG 2400 1st Edition Lecture 18Outline of Last Lecture I. Chapter 7a. Inventory Cost b. Inventory PoliciesII. USED MAJORITY OF CLASS TIME FOR IN-CLASS ASSIGNMENTOutline of Current Lecture I. Inventory methodsII. COGS equationIII. Inventory management Methodsa. Perpetualb. PeriodicCurrent LectureInventory Methods Financial Statement EffectsWeighted average: Smoothes out price changesFIFO: ending inventory approximates current replacement costLIFO: better matches current costs in cost of goods sold with revenuesNote: if inventory purchase costs are rising, LIFO results in higher COGS expense therefore lowerNet Income Tax (for now)These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.COGS EquationInventory Management MethodsCompanies use one of two inventory management methodsPerpetual- Perpetual = always = continuously- Records revenue for each sales transaction- Cost of goods sold expense (sale of inventory) is recorded for EVERY individual sale transactionPeriodic- Periodic = every once in a while- Records revenue for each sale transaction- Cost of goods sold expense (sale of inventory) is only recorded the END of each period (after inventory is
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