Chapter 6 Accounting

Good Essays
Weighted average cost flow assumption: Weighted average assumes that cost flow at an average of the costs available.
Costs of goods sold and Ending inventory:
-Cost of goods sold + ending inventory = the total goods available for sale.
-Cost of goods available for sale must be allocated between cost of goods sold and ending inventory.
FIFO cost flow assumption: The cost of items purchased earliest are the costs that will be transferred first to cost of goods sold on the income statement.
LIFO cost flow assumption: The cost of items purchased latest are the costs that will be transferred first to cost of goods sold on the income statement.
4 methods used to assign costs to inventory and cost of goods sold
1. Specific Identification
2. First-in, first-out
3. Last-in, first-out
4. Weighted average
Goods in Transit: If goods are shipped FOB shipping point, then the purchaser is responsible for paying freight charges and the seller will not include the merchandise in their inventory.
Steps to apply LCM to individual items of inventory:
1. List the number of units of each product
2. List the cost of each item
3. List the market price of each item
4. Compute total cost and total market value for each item
5. Compare recorded cost of each inventory item with its replacement cost. List lower of cost or market.
6. Adjust inventory downward when market is less than cost.
Physical flow and Cost flow of goods
-Perishable items must have an actual physical flow of FIFO
-Physical flow is focused on the actual movement of goods
-Cost flow is an assumption about which goods/items are sold.
-A business may adopt any cost flow assumption when accounting for perishable items.
Determine cost of goods sold for X-mart, assuming that beginning inventory was $5,000. Net purchases were $20,000 and ending inventory was $9,000.
*Beginning inventory + Net purchases – Ending inventory = Cost of goods sold
5000 + 20000 - 9000= 16000
Sparky’s incorrectly included inventory that was on

You May Also Find These Documents Helpful

  • Good Essays

    Chapter 6

    • 1799 Words
    • 8 Pages

    CHAPTER 6 Accounting and the Time Value of Money CHAPTER REVIEW 1. (L.O. 1) Chapter 6 discusses the essentials of compound interest, annuities and present value. These techniques are being used in many areas of financial reporting where the relative values of cash inflows and outflows are measured and analyzed. The material presented in Chapter 6 will provide a sufficient background for application of these techniques to topics presented in subsequent chapters. 2. Compound interest…

    • 1799 Words
    • 8 Pages
    Good Essays
  • Satisfactory Essays

    Chapter 6 Notes o Cost Of Merchandise Sold- revenue is reported as sales, cost is reported as merchandise sold o Sales- Cost of Merchandise Sold = gross Profit o Gross profit-operating expenses = net income o Merchandise. Inventory- merchandise on hand (not sold) at the end of the accounting period o Multi-step income statement- contains several sections, subsections, subtotals o Sales-total amount charged customers for merchandise sold – (cash sales, and sales on…

    • 449 Words
    • 2 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Chapter 6

    • 610 Words
    • 22 Pages

    Statistical Quality Control Montgomery’s 6th edition Solutions for Chapter 06 Jan Rohlén jan.rohlen@hb.se Question 6.04 Sample No. Ri Xi 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 9 7 5 7 6 2 8 6 5 6 8 7 7 6 9 5 4 8 6 4 10 7.75 7.5 9 9.75 10.75 10.75 6.5 9 13.5 12.5 9.75 13.25 10.5 11 12.5 9.75 10.75 8.75 13.25 Table 1: Table 6E.4 1 LaTeX Typesetting by : Amirkiarash Kiani Jan Rohlén Statistical Quality Control Chapter 06 (a) R= Ri = 6.25 m Sample Size 4 X= A2 0.729 D3 0 Xi =…

    • 610 Words
    • 22 Pages
    Satisfactory Essays
  • Satisfactory Essays

    Chapter 6

    • 985 Words
    • 11 Pages

    23rd Wedn., Feb. 25th Mon., Mar. 2nd Simulation & Case Info Business Level Strategy Cases, Case Analysis Chapter Chapter 6 Reflection Paper 1 Corporate Level Strategy Chapter 8 Quiz (Chapters 6&8) Organizational Design & Culture Strategic Leadership & Process Exam 2 Chapter 11 Wedn., Mar. 4th Mon., Mar. 9th Wedn., Mar. 11th Team Meetings Chapter 2 Quiz (Chapters 2&11) Chapters 2, 6, 8 & 11 Practice Round 1 due by 5pm on Sunday, the 8th Capstone Practice Review…

    • 985 Words
    • 11 Pages
    Satisfactory Essays
  • Good Essays

    Chapter 6

    • 311 Words
    • 2 Pages

    2) Which department authorizes changes in employee pay rates? - Production department does the authorizing; Production employees prepare two types of time records. This helps the cost accounting department. They use this to allocate direct labor changes to work-in-process (WIP) Accounts. 3) Why should the employee’s supervisor not distribute paychecks? - Because there is a chance the supervisor could create a non-existent employee and time card him in then taking his checks for themselves.…

    • 311 Words
    • 2 Pages
    Good Essays
  • Better Essays

    Chapter 6

    • 1552 Words
    • 7 Pages

    Chapter 6: Key Points The following annotated chapter outline will help you review the key points covered in this chapter. Instructions: Review the outline to recall events and their relationships as presented in the chapter. Return to skim any sections that seem unfamiliar. As Augustus restored peace in 31 b.c.e., he established a constitutional monarchy, created the Roman Empire, and ushered in a period of peace and prosperity known as the Pax Romana that enabled Greco-Roman culture to continue…

    • 1552 Words
    • 7 Pages
    Better Essays
  • Satisfactory Essays

    Chapter 6

    • 973 Words
    • 4 Pages

    NARANDAN ROLAN M. CHAPTER 6 1. Why do you think schedule issues often cause the most conflicts on projects? Schedules may be viewed differently in other cultures as well and Project managers must be aware of these concerns. Sometimes the original schedule was not realistically thought out and was too aggressive. Another reason is that time continues to move forward no matter what is being done to manage it. Careful consideration must be exercised to keep this perspective in mind during the…

    • 973 Words
    • 4 Pages
    Satisfactory Essays
  • Powerful Essays

    Chapter 6

    • 6248 Words
    • 32 Pages

    Chapter 6 Student: ___________________________________________________________________________ 1. Which of the following refers to a situation where a government does not attempt to restrict what its citizens can buy from another country or what they can sell to another country? A. Free trade B. Unencumbered trade C. Sovereign trade D. Autonomous trade E. Open trade 2. Which of the following is not an example of one of the main instruments in trade policy used by governments around the world…

    • 6248 Words
    • 32 Pages
    Powerful Essays
  • Satisfactory Essays

    Chapter 6

    • 1458 Words
    • 7 Pages

    Macroeconomics Gleb Sazenkov (ADE AR) Chapter 6 1. Using the information in this chapter, label each of the following statements true, false or uncertain. Explain briefly. a. The national income identity implies that budget deficits cause trade deficits. False. Actually, if we look at the formula of our Y we can see that we don’t have anything there that could tell us that budget deficit can cause a trade deficit. Y = C + I + G + (X-IM/e) If we have a budget deficit, so our NX will be affected…

    • 1458 Words
    • 7 Pages
    Satisfactory Essays
  • Good Essays

    Chapter 6

    • 445 Words
    • 2 Pages

    revolutions. Ben Franklin recognized that corruption could result from both natural and artificial causes. Jefferson was always faced with the reality of his plan failing constantly reminded by the thought of the decline of the Roman Empire. I found this Chapter…

    • 445 Words
    • 2 Pages
    Good Essays