Concept explainers
Inventory:
Inventory refers to the stock or goods which will be sold in the near future and thus is an asset for the company. It comprises of the raw materials which are yet to be processed, the stock which is still going through the process of production and it also includes completed products that are ready for sale. Thus inventory is the biggest and the important source of income and profit for the business.
Periodic inventory system: In periodic inventory system the changes in the stock items are reported periodically unlike recording as and when purchases or sales take place.
Cost of goods available for sale: It basically includes the cost of inventory which is ready for sale within an accounting period. It mainly includes the cost of beginning inventory as well as the stock purchased in that year and the production within that period (if any).
Cost of goods Sold: Cost of goods sold is the total expenses or the cost incurred by the business during the process of manufacturing of goods and is directly related to the production. It generally includes the cost of raw material, labor and other
Gross Profit: The profit made after subtracting or debiting the costs related to the goods sold from the total revenue earned or made through sales in a fiscal year is the gross profit.
Specific identification method: Under this method, there is a continuous tracking of the inventory and the inventory cost at the time of purchase on the basis of unique identity which thus helps in the valuation of the ending inventory as well as the cost of goods sold. This method is used generally when the company is involved in limited expensive goods which are easily identifiable.
Weighted average cost method: In this method the weighted average cost is evaluated after any purchases have been made and transactions are recorded as when purchase or sales take place.
First in first out: In case of First in, first out method, also known as FIFO method, the inventory which was bought first will also be the first one to be taken out.
Last in first out: In case of Last in, first out, also known as LIFO method, the inventory which was bought in the last will be taken out first.
To compute: 1. Cost of goods available for sale and number of units available for sale.
2. Number of units in ending inventory.
3. Cost of ending inventory under the following methods:
- (a) FIFO
(b) LIFO
(c) Weighted average
(d) Specific identification
5. The inventory costing method suitable incase of bonus earned on gross profit.

Want to see the full answer?
Check out a sample textbook solution
Chapter 5 Solutions
FINAN+MAN ACCT (LL)W/ACCESS+PROCTORIO
- Please help mearrow_forwardA traveling production of Fame Broadway performs each year. The average show sells 1,500 tickets at $60 per ticket. There are 120 shows each year. The show has a cast of 70, each earning an average of $350 per show. The cast is paid only after each show. The other variable expense is program printing costs of $7 per guest. Annual fixed expenses total $1,500,000. Requirements: Compute revenue and variable expenses for each show.arrow_forwardhello tutor provide answer of this General accounting questionarrow_forward
- Find the total assetsarrow_forwardWhat are the revenues for divisions M?arrow_forwardHarper Manufacturing produces a special type of polymer used in medical devices. In 2022, the first year of operations, Harper produced 5,500 tons of polymer and sold 3,200 tons. In 2023, the company produced the same amount but sold 6,500 tons (i.e., selling all of its inventory). The selling price per ton was $1,800, variable manufacturing costs per ton were $350, and variable selling expenses were $500 per ton. Fixed manufacturing costs were $3,500,000, and fixed administrative expenses were $600,000. Compute net income under variable costing for 2022.arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





