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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Describe the flow of costs for o merchandising company and a manufacturing company.

To determine

Explain the flow of costs for a merchandising company and manufacturing company.

Explanation

Inventory cost flow methods:

These are the methods used by the companies to compute the cost assigned to inventory from the time inventory is bought to the time inventory is sold.

The flow of costs for a merchandising company are as follows:

  • The goods purchased is shown as the inventory.
  • The inventory sold is at once shown as the cost of goods sold.

The flow of costs for a manufacturing company are as follows:

  • The goods purchased is shown as the raw materials inventory...

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