century 21 accounting © 2009 south-western, cengage learning lesson 6-2 inventory costing fifo...
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 6-2LESSON 6-2
Inventory Costing
FIFO inventory costing methodLIFO inventory costing methodWeighted-average costing methodLower of cost or market inventory costing method
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Chapter 6 ObjectivesChapter 6 ObjectivesInventory Planning and ValuationInventory Planning and Valuation
After studying Chapter 6, you will be able to:Define accounting terms related to planning and costing inventory.Identify accounting concepts and practices related to planning, counting, and costing inventory.Describe the nature of merchandise inventory.Determine the cost of merchandise inventory using selected costing methods.Estimate the cost of merchandise inventory using selected estimating methods.Calculate merchandise inventory turnover ratio and average number of days’ sales in merchandise inventory.
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LESSON 6-2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Lesson 6-2Lesson 6-2 first-in, first-out inventory costing method (FIFO): using
the price of merchandise purchased first to calculate the cost of merchandise sold first
last-in, first-out inventory costing method (LIFO): using the price of merchandise purchased last to calculate the cost of merchandise sold first
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
lower of cost or market inventory costing method: using the lower of cost or market price to calculate the cost of ending merchandise inventory
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LESSON 6-2
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-2
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.
FIRST-IN, FIRST-OUT INVENTORY FIRST-IN, FIRST-OUT INVENTORY COSTING METHODCOSTING METHOD page 176
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-2
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.
LAST-IN, FIRST-OUT INVENTORY LAST-IN, FIRST-OUT INVENTORY COSTING METHODCOSTING METHOD page 177
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-2
WEIGHTED-AVERAGE INVENTORY WEIGHTED-AVERAGE INVENTORY COSTING METHODCOSTING METHOD page 177
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-2
COSTING INVENTORY DURING COSTING INVENTORY DURING PERIODS OF INCREASING PRICESPERIODS OF INCREASING PRICES page 178
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-2
COSTING INVENTORY DURING COSTING INVENTORY DURING PERIODS OF DECREASING PRICESPERIODS OF DECREASING PRICES page 179
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-2
RESULTS OF THE THREE INVENTORY RESULTS OF THE THREE INVENTORY COSTING METHODS COMPAREDCOSTING METHODS COMPARED page 179
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-2
1. Calculate the cost.
2. Calculate the market price.
3. Determine the smaller number to use as the lower of cost or market amount.
LOWER OF COST OR MARKET LOWER OF COST OR MARKET INVENTORY COSTING METHODINVENTORY COSTING METHOD page 180
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 6-2
DEFINE TERMS REVIEWDEFINE TERMS REVIEWIn QuizletIn Quizlet
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
page 181
Edit this set: Chapter 6 AdvAcc (then SAVE)
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Exit Ticket for today:Exit Ticket for today:Audit Your Understanding 6-2Audit Your Understanding 6-2
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?
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LESSON 6-2
In a Word Document, SaveAS: Chapter6-2AYUYourNameAnd drop in my Inbox today!
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
Complete the following assignments for Complete the following assignments for Chapter 6-2 todayChapter 6-2 today
Define Terms Review on page 181. Answer Audit Your Understanding questions on page
181. Complete Work Together 6-2 on Aplia – page 181. Complete On Your Own 6-2 on Aplia – page 181. Complete Application Problem 6-2 on Aplia – page
189.
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LESSON 6-2