Inventory and COGS (4 pages)

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Inventory and COGS



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Inventory and COGS

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Lecture number:
12
Pages:
4
Type:
Lecture Note
School:
University of Arizona
Course:
Acct 200 - Introduction to Financial Accounting
Edition:
1

Unformatted text preview:

ACCT 200 1st Edition Lecture 12 Outline of Last Lecture I Review Examples II E 5 15 III E 5 17 IV E 5 18 V Important Notes Outline of Current Lecture I Miscellaneous Notes II BE 6 3 III FIFO LIFO Weighted Average Cost IV BE 6 4 6 5 6 6 6 8 V Inventory Purchases VI Sales Journal Entry Current Lecture Cost of goods sold only expense that doesn t have the word expense Walmart buys pencils for 80 sells for 2 8 is cost of goods sold Manufacturing companies make what they sell Specific identification won t have to do calculations just know definition BE 6 3 Begin inventory 7000 Purchases during year 22 000 Remaining inventory 9000 Cost of goods sold COGS 7000 22 000 9000 20 000 expense FIFO best method LIFO good for tax purposes to save money 10 15 of companies use LIFO isn t allow internationally Weighted Average Cost simplest BE 6 4 FIFO 6 5 LIFO 6 6 Weighted Average Cost Units unit total Jan 1 begin inventory 50 72 3600 May 5 purchase 200 75 15 000 Nov 3 purchase 100 80 8000 Total 350 n a 26 000 Sell 320 30 left BE 6 4 FIFO Units unit COGS Jan 1 50 72 3600 May 5 200 75 15 000 Nov 3 70 80 5600 Remaining 30 80 Total end inventory 2400 24 200 sold 2400 unsold 26 600 BE 6 5 LIFO Units unit 30 72 20 72 1440 May 5 200 75 15 000 Nov 3 100 80 8000 Jan 1 Remaining COGS end inventory 2160 24 440 sold 2160 unsold 26 600 BE 6 6 Weighted Average Cost Total cost of goods available total units 26 600 350 76 End inventory units 30 76 2280 value of inventory Units sold 320 76 24 320 value of COGS BE 6 8 If costs are rising LIFO lowest end inventory highest COGS lowest net income FIFO highest end inventory lowest COGS highest net income Weighted Average Cost in the middle for all Perpetual and periodic inventory systems can use a combo of both Best Buy we will focus on perpetual method Purchase transactions company is buying inventory to resell later to customers Buy inventory on acct terms 2 10 net 30 3000 3 1 Inventory 3000 Acct payable 3000 Look at purchase and 200 is damaged so we



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