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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Cost flow methods

The following three identical units of Item BZ1810 are purchased during November:

Chapter 7, Problem 7.1APE, Cost flow methods The following three identical units of Item BZ1810 are purchased during November:

Assume that one unit is sold on November 30 for $90.

Determine the gross profit for November and ending inventory on November 30 using the (a) first-in, first-out (FIFO); (b) last-in, first-out (LIFO); and (c) weighted average cost methods.

(a)

To determine

Cost flow assumptions:

Cost flow assumptions can be referred to the method which determines the flow of costs when an inventory is sold. Instead of keeping a track record for cost of each product sold, a company adopts these methods, and identifies which units were sold. It differs from specific identification method because the actual physical movement of goods may be unrelated to the flow of costs.

Gross profit and ending inventory under First-in-first out (FIFO) method.

Explanation

Here the first units purchased are expected to be sold first. Therefore, November 2 units are assumed to be sold...

(b)

To determine

Gross profit and ending inventory under Last-in-first out (LIFO) method.

(c)

To determine

Gross profit and ending inventory under weighted average inventory method.

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