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ACC 205 WEEK 3 DQ 2 Inventory Valuation Methods: FIFO vs. LIFO and Their Impact on Cost of Goods Sold and Ending Inventory

Comparison of FIFO and LIFO inventory valuation methods.

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Inventory Valuation Methods: FIFO vs. LIFO and Their Impact on Cost of Goods Sold andEnding InventoryACC 205 WEEK 3 DQ 2Merchandise Inventory. Describe the inventory valuation methods FIFO and LIFO. Which items are included in ending inventory under eachmethod?Under FIFO, it is assumed that items purchased first are sold first.Under LIFO, it is assumed that items purchased last are sold first.Example:FIFO vs. LIFOCost of goods soldCost of endinginventoryBeginning inventory+ PurchasesFIFO, Perpetual$11,000$8,600$19,600LIFO, Perpetual$12,400$7,200$19,600FIFO assumes that items purchased FIRST are sold FIRST.--> Cost of old purchase is recorded as cost of goods sold.--> Cost of recent purchases is recorded as cost of ending inventory.--> When price goes up, old price is lower than recent price.

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University
National University
Subject
Accounting

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