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 and
Ending Inventory
ACC 205 WEEK 3 DQ 2
Merchandise Inventory. Describe the inventory valuation methods FIFO and LIFO. Which items are included in ending inventory under each
method?
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. LIFO Cost of goods sold Cost of ending
inventory
Beginning inventory
+ Purchases
FIFO, Perpetual $11,000 $8,600 $19,600
LIFO, Perpetual $12,400 $7,200 $19,600
FIFO 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.
Ending Inventory
ACC 205 WEEK 3 DQ 2
Merchandise Inventory. Describe the inventory valuation methods FIFO and LIFO. Which items are included in ending inventory under each
method?
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. LIFO Cost of goods sold Cost of ending
inventory
Beginning inventory
+ Purchases
FIFO, Perpetual $11,000 $8,600 $19,600
LIFO, Perpetual $12,400 $7,200 $19,600
FIFO 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