Valuation of Inventory and Cost of Goods Sold

Related BrainMass Solutions

• VALUATION OF CLOSING INVENTORY under various methods

  IS BASED ON THE CONCEPT LAST IN FIRST OUT AND ALSO THE GOODS PURCHASED LAST AT HIGHER PRICE, THUS IT WILL BE PART OF COST OF GOODS SOLD] AVERAGE UNIT COST METHOD(WEIGHTED AVERAGE METHOD) VALUATION OF CLOSING INVENTORY

• Gross Profit and Ending Inventory FIFO and LIFO

  300,000 FIFO Inventory valuation Gross profit Sales 17,000 $340,000 Less: Cost of goods sold $252,000 Gross profit $88,000 Ending inventory 3,000 $48,000 Cost of goods

• This post addresses inventory valuation and net income.

  The choice of inventory valuation method affects the company's net income due to how each method affects the cost of goods sold.

• This post discusses why inventory valuation is important.

  The cost of goods sold affects our gross profit, which is calculated as gross income minus cost of goods sold.

• Inventory Valuation and the Effect on Profit.

  Inventory valuation methods impact the valuation of inventory and the cost of goods sold. There by it affects the balance sheet, income statement and statement of cash flow.

• The Effects of LIFO Inventory Valuation

  Finally, because inventory turnover is the ratio of cost of goods sold to average inventory, and cost of goods sold is greater and inventory is lower under LIFO than under FIFO, answer d) is wrong.

• Converting LIFO to FIFO

  Restate KW's cost of goods sold and inventory balances to the FIFO basis. On the basis of its adjusted data, recompute KW's gross margin percentage and inventory turnover.

• Do you think it is necessary to have as many different valuation and flow assumptions as we have? Why or why not?

  (a) which of the cost prices should be charged to different issues of inventory and which cost price should be charged to cost of goods sold in income statement.

• Cost Valuation Systems: Inventory and Costs of Goods Sold

  The solution discusses the cost valuation system, including the inventory and costs of goods sold.

• FIFO and LIFO

  Cost of goods sold = Beginning inventory + Purchases - Ending inventory Thus income before taxes would have been lesser by $20,000 as cost of goods sold would have been higher by $20,000.