A merchandising business purchases goods for resale. A merchandiser makes a profit by selling goods at a price higher than the cost of the goods sold. While the underlying business transaction is straightforward, determining of the cost of the merchandise sold often requires an inventory cost flow assumption when similar units are purchased at different units costs during the period. Identify cost flow assumptions to their description: Cost Flow Assumption (choose between FIFO,LIFO, weighted average, or specific identication) Description   Cost flow is the reverse order in which the costs were incurred.   Cost flow is the order in which the costs were incurred.   Cost flow is an average of the purchase costs.   Unit cost is identified with a specific purchase Often, specification identification may not be practical, so one of the other three cost flow assumptions is assumed. The cost flow assumption can be applied under either the perpetual or periodic inventory system.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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A merchandising business purchases goods for resale. A merchandiser makes a profit by selling goods at a price higher than the cost of the goods sold. While the underlying business transaction is straightforward, determining of the cost of the merchandise sold often requires an inventory cost flow assumption when similar units are purchased at different units costs during the period. Identify cost flow assumptions to their description:

Cost Flow Assumption (choose between FIFO,LIFO, weighted average, or specific identication) Description
  Cost flow is the reverse order in which the costs were incurred.
  Cost flow is the order in which the costs were incurred.
  Cost flow is an average of the purchase costs.
  Unit cost is identified with a specific purchase

Often, specification identification may not be practical, so one of the other three cost flow assumptions is assumed. The cost flow assumption can be applied under either the perpetual or periodic inventory system.

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