LESSON 6 2 Inventory Costing FIFO inventory costing

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LESSON 6 -2 Inventory Costing FIFO inventory costing method LIFO inventory costing method Weighted-average

LESSON 6 -2 Inventory Costing FIFO inventory costing method LIFO inventory costing method Weighted-average costing method Lower of cost or market inventory costing method CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning

2 Chapter 6 Objectives Inventory Planning and Valuation After studying Chapter 6, you will

2 Chapter 6 Objectives Inventory Planning and Valuation After studying Chapter 6, you will be able to: n Define accounting terms related to planning and costing inventory. n Identify accounting concepts and practices related to planning, counting, and costing inventory. n Describe the nature of merchandise inventory. n Determine the cost of merchandise inventory using selected costing methods. n Estimate the cost of merchandise inventory using selected estimating methods. n Calculate merchandise inventory turnover ratio and average number of days’ sales in merchandise inventory. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6 -2

3 Lesson 6 -2 n first-in, first-out inventory costing method (FIFO): using the price

3 Lesson 6 -2 n first-in, first-out inventory costing method (FIFO): using the price of merchandise purchased first to calculate the cost of merchandise sold first n last-in, first-out inventory costing method (LIFO): using the price of merchandise purchased last to calculate the cost of merchandise sold first n weighted-average inventory costing method: using the average cost of beginning inventory plus merchandise purchased during a fiscal period to calculate the cost of merchandise sold n lower of cost or market inventory costing method: using the lower of cost or market price to calculate the cost of ending merchandise inventory CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6 -2

4 FIRST-IN, FIRST-OUT INVENTORY COSTING METHOD page 176 3 1 4 2 1. Assign

4 FIRST-IN, FIRST-OUT INVENTORY COSTING METHOD page 176 3 1 4 2 1. Assign units from most recent purchase. 2. Assign units from next most recent purchase. 3. Multiply ending inventory units by unit price. 4. Total the ending inventory columns. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6 -2

5 LAST-IN, FIRST-OUT INVENTORY COSTING METHOD page 177 3 1 4 2 1. Assign

5 LAST-IN, FIRST-OUT INVENTORY COSTING METHOD page 177 3 1 4 2 1. Assign units from earliest purchase. 2. Assign units from next earliest purchase. 3. Multiply ending inventory units by unit price. 4. Total the ending inventory columns. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6 -2

6 WEIGHTED-AVERAGE INVENTORY COSTING METHOD CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning page

6 WEIGHTED-AVERAGE INVENTORY COSTING METHOD CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning page 177 LESSON 6 -2

7 COSTING INVENTORY DURING PERIODS OF INCREASING PRICES CENTURY 21 ACCOUNTING © 2009 South-Western,

7 COSTING INVENTORY DURING PERIODS OF INCREASING PRICES CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning page 178 LESSON 6 -2

8 COSTING INVENTORY DURING PERIODS OF DECREASING PRICES CENTURY 21 ACCOUNTING © 2009 South-Western,

8 COSTING INVENTORY DURING PERIODS OF DECREASING PRICES CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning page 179 LESSON 6 -2

9 RESULTS OF THE THREE INVENTORY COSTING METHODS COMPARED CENTURY 21 ACCOUNTING © 2009

9 RESULTS OF THE THREE INVENTORY COSTING METHODS COMPARED CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning page 179 LESSON 6 -2

10 LOWER OF COST OR MARKET INVENTORY COSTING METHOD 1 2 page 180 3

10 LOWER OF COST OR MARKET INVENTORY COSTING METHOD 1 2 page 180 3 1. Calculate the cost. 2. Calculate the market price. 3. Determine the smaller number to use as the lower of cost or market amount. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6 -2

11 DEFINE TERMS REVIEW In Quizlet page 181 Edit this set: Chapter 6 Adv.

11 DEFINE TERMS REVIEW In Quizlet page 181 Edit this set: Chapter 6 Adv. Acc (then SAVE) n n first-in, first-out inventory costing method last-in, first-out inventory costing method weighted-average inventory costing method lower of cost or market inventory costing method CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6 -2

12 Exit Ticket for today: Audit Your Understanding 6 -2 In a Word Document,

12 Exit Ticket for today: Audit Your Understanding 6 -2 In a Word Document, Save. AS: Chapter 6 -2 AYUYour. Name And drop in my Inbox today! 1. What inventory costing method does a business usually use? 2. Which inventory costing method uses the earliest purchase prices to determine the cost of merchandise inventory? 3. During a period of increasing prices, what inventory costing method will result in the highest reported net income? 4. What two amounts are needed to apply the lower of cost or market inventory costing method? CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6 -2

13 Complete the following assignments for Chapter 6 -2 today n Define Terms Review

13 Complete the following assignments for Chapter 6 -2 today n Define Terms Review on page 181. n Answer Audit Your Understanding questions on page 181. n Complete Work Together 6 -2 on Aplia – page 181. n Complete On Your Own 6 -2 on Aplia – page 181. n Complete Application Problem 6 -2 on Aplia – page 189. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6 -2

FIFO introduction The function of the FIFO DataFIFO introduction The function of the FIFO Data
FIFO design and FIFO lab Jizhe Zhang OverviewFIFO design and FIFO lab Jizhe Zhang Overview
2 6 1 FIFO FIFO First In First2 6 1 FIFO FIFO First In First
209 Inventory Costing Absorption Costing Variable Costing Throughput209 Inventory Costing Absorption Costing Variable Costing Throughput
209 Inventory Costing Absorption Costing Variable Costing Throughput209 Inventory Costing Absorption Costing Variable Costing Throughput
209 Inventory Costing Absorption Costing Variable Costing Throughput209 Inventory Costing Absorption Costing Variable Costing Throughput
Job costing 1 Job Costing n Job costingJob costing 1 Job Costing n Job costing
UNIT COSTING Unit Costing Output Costing or SingleUNIT COSTING Unit Costing Output Costing or Single
JOB COSTING DISTINGUISH BETWEEN JOB COSTING PROCESS COSTINGJOB COSTING DISTINGUISH BETWEEN JOB COSTING PROCESS COSTING
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5 Costing Systems Process Costing The Process Costing5 Costing Systems Process Costing The Process Costing
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