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7 Cards in this Set

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  • Back

What does the physical inventory count do?

it verifies the balance on the books

How would you do a journal entry for a $600 inventory shrinkage?

COGS 600

Inventory 600

What is the FIFO method used for?

  • it produces the highest COGS
  • used by companies with perishable or time-dated products

What is the LIFO method used for?

  • it produces the lowest COGS
  • used by some companies for income tax benefits
  • does not reflect the actual flow of goods for most businesses

When is the weighted average cost method used?

generally used in warehouses for a bunch of undifferentiated goods. COGS is neither high nor low

Lower of Cost or market:

inventory is usually valued at it's acquisition cost

How would you calculate for the weighted average cost method?

Cost of Goods Available for Sale = Avg. Unit cost

Total Units Available for Sale

(Avg. unit cost)(units left over)= Ending inventory