Chapter 5 Flashcards
Fob shipping point
Goods includes in buyers inventory when shipped
Fob destination
Goods included in buyers inventory after arrival at destination
Damaged goods equation
Net realizable value - sales price - selling costs
4 inventory costing methods
Specific identification
FIFO
LIFO
Weighted average
Periodic method
Done at end of the month
Average cost method equation
Ending inventory/total # of units = $ per stock
Inventory costs equation
Invoice cost -discounts + incidental cost
Incidental costs include
Shipping
Storage
Insurance
Taxes
FIFO advantage
Ending inventory approximates current cost
LIFO advantage
Cogs on income statement approximates its current costs
Weighted average advantage
smoothes out price changes
LIFO costs
Higher cogs, lower Ni
FIFO costs
Lower cogs, higher Ni
LIFO conformity rule
IRS requires when LIFO is used for tax reporting, it must also be uses for financial reporting
Lower costs or market
Inventory must be reported at market value when market is lower than cost
