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What is an acceptable method of determining inventory cost under GAAP?
Wiki User
∙ 11y ago
One can use FIFO, LIFO, or Average Costing as acceptable methods for accounting. Standard costing would be an unacceptable answer.
Wiki User
∙ 11y ago
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What is the Average Cost method of inventory valuation?
Average Cost Method: Under this method average cost is calculated by following farmula:Average cost of unit= Total cost of inventory / total number of units
Under which method of cost flows is the inventory assumed to be composed of the most recent costs?
last in first out
Under which method of inventory cost flows is the cost flow assumed to be in the reverse order in which the expenditures were made?
false
Under which method of inventory cost flows is the cost flow assumed to be in reverse order in which expenditures were made?
LIFO
Changing the method of inventory valuation should be reported in the financial statements under what qualitative characteristic of accounting information?
timeliness
What is the Average Cost method of inventory valuation?
Average Cost Method: Under this method average cost is calculated by following farmula:Average cost of unit= Total cost of inventory / total number of units
Under which method of cost flows is the inventory assumed to be composed of the most recent costs?
last in first out
Under which method of inventory cost flows is the cost flow assumed to be in the reverse order in which the expenditures were made?
false
Under which method of inventory cost flows is the cost flow assumed to be in reverse order in which expenditures were made?
LIFO
Inventory is reported at cost plus gross profit recognized to date under what revenue recognition methods?
instalment method
Changing the method of inventory valuation should be reported in the financial statements under what qualitative characteristic of accounting information?
timeliness
When it comes to drivng under the influence the best method of making choices is to?
Driving under influence of alcohol is not acceptable. This can lead to accident. The best choice is to stop and call for help.
Why does net income change with the FIFO?
FIFO (first in first out) is a method of account for inventory. With FIFO, if inventory costs are increasing your cost of goods sold will be lower than under the LIFO (last in first out) method. If inventory costs are increasing, FIFO will result in higher net income (lower COGS) than LIFO. If inventory costs are decreasing, FIFO will result in lower net income (higher COGS) than LIFO.
What are some examples of when the FIFO and the weighted average inventory methods should be used?
The computation of equivalent units under FIFO method differs from weighted average method in two ways. First the units transferred out figure is divided into two parts. One part consists of the units from beginning inventory that were completed and transferred out, and the other part consists of the units that were both started and completed during the current period. Second full consideration is given to the amount of work expended during the current period on units in the beginning work in process inventory as well as units in the ending inventory. Thus, under the FIFO method, it is necessary to convert both beginning and ending inventories to an equivalent unit basis. For the beginning inventory, the equivalent units represent the work done to complete the units; for the ending inventory, the equivalent units represent the work done to bring the units to a stage of partial completion at the end of the period ( the same as with the weighted average method). The formula for computing equivalent units of production is more complex under FIFO method than under weighted average method. On December 31, 2006 Company appropriately changed to the FIFO cost method from The weighted-average cost method for financial statement and income tax purposes. the change will result in a $70,000 increase in the beginning inventory @January 1, 2006. Assuming a 40 Percent income tax rate, the cumulative effect of this accounting change reported for the year ended December 31,2006, is A. 700,000 B. 420,000 C. 350,000 D. 280,000 My Answer is 700,000/40%=280,000 Is any one have idea abourt FIFO cost method. Help is really appreciated
Under a perpetual inventory system acquisition of merchandise for resale is debited to?
Merchandise Inventory account
When A buyer would record a payment within the discount period under a perpetual inventory system by crediting?
Inventory
Under which circumstances would adjustments to inventory levels be made?
Adjustments to inventory levels are made when new inventories are bought.
