Cost Flow from Inventory to Cost of Goods Sold Cost Flow refers to methods available for moving the company’s product cost from Inventory to Cost of Goods Sold. Methods include FIFO and LIFO. Under FIFO, Cost of goods sold would be purchase price of Goods Purchased earlier. Under LIFO cost of goods sold would reflect goods purchased later. To discuss The flow of cost from Inventory to Cost of Goods sold under FIFO and LIFO with appropriate examples

Question

Want to see more full solutions like this?

Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 6, Problem 1DQ

To determine

Concept introduction:

Cost Flow from Inventory to Cost of Goods Sold

Cost Flow refers to methods available for moving the company’s product cost from Inventory to Cost of Goods Sold. Methods include FIFO and LIFO. Under FIFO, Cost of goods sold would be purchase price of Goods Purchased earlier. Under LIFO cost of goods sold would reflect goods purchased later.

To discuss

The flow of cost from Inventory to Cost of Goods sold under FIFO and LIFO with appropriate examples

Expert Solution & Answer

Explanation of Solution

FIFO(First In First Out) Method:

Under FIFO, Cost of Goods sold will comprise of costs which were undertaken earlier by the company on purchase of a product, and inventory will reflect the cost at its current price. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $45 and $47, whereas Ending Inventory will be valued at $48. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$92($45+$47)

Gross Profit………………………….$108

Balance Sheet

Inventory…………………………….$48

LIFO(First In First Out) Method:

Under LIFO, Cost of Goods Sold will comprise of costs which are most recent and inventory will reflect earlier prices of the product. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $48 and $47, but inventory will be $45. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$95($47+$48)

Gross Profit………………………….$105

Balance Sheet

Inventory…………………………….$45

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Expand upon it and add more info

JH, Inc., is a calendar year, accrual basis corporation with Joe as its sole shareholder (basis in his stock is $90,000). On January 1 of the current year, JH Corporation has accumulated E & P of $200,000. Before considering the effect of the distribution described below, the corporation’s current E & P is $50,000. On November 1, JH distributes an office building to Joe. The office building has an adjusted basis of $80,000 (fair market value of $100,000) and is subject to a mortgage of $110,000. Assume that the building has been depreciated using the ADS method for both income tax and E & P purposes. What are the tax consequences of the distribution to JH and to Joe? (In your answer, be sure to describe the effects on taxable income for both JH and Joe, the impact of the distribution on JH’s E & P, and Joe’s basis in the building.)

Joe is the sole shareholder of JH Corporation. Joe sold his stock to Ethan on October 31 for $150,000. Joe’s basis in JH stock was $50,000 at the start of the year. JH distributed land to Joe immediately before the sale. JH’s basis in the land was $20,000 (fair market value of $25,000). On December 31, Ethan received a $75,000 cash distribution from JH. During the year, JH has $20,000 of current E & P and its accumulated E & P balance on January 1 is $10,000. Which of the following statements is true? a. Joe recognizes a $110,000 gain on the sale of his stock. b. Joe recognizes a $100,000 gain on the sale of his stock. c. Ethan receives $5,000 of dividend income.d. Joe receives $20,000 of dividend income. e. None of the above.

Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 6, Problem 1DQ

To determine

Concept introduction:

Cost Flow from Inventory to Cost of Goods Sold

Cost Flow refers to methods available for moving the company’s product cost from Inventory to Cost of Goods Sold. Methods include FIFO and LIFO. Under FIFO, Cost of goods sold would be purchase price of Goods Purchased earlier. Under LIFO cost of goods sold would reflect goods purchased later.

To discuss

The flow of cost from Inventory to Cost of Goods sold under FIFO and LIFO with appropriate examples

Expert Solution & Answer

Explanation of Solution

FIFO(First In First Out) Method:

Under FIFO, Cost of Goods sold will comprise of costs which were undertaken earlier by the company on purchase of a product, and inventory will reflect the cost at its current price. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $45 and $47, whereas Ending Inventory will be valued at $48. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$92($45+$47)

Gross Profit………………………….$108

Balance Sheet

Inventory…………………………….$48

LIFO(First In First Out) Method:

Under LIFO, Cost of Goods Sold will comprise of costs which are most recent and inventory will reflect earlier prices of the product. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $48 and $47, but inventory will be $45. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$95($47+$48)

Gross Profit………………………….$105

Balance Sheet

Inventory…………………………….$45

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 6, Problem 1DQ

To determine

Concept introduction:

Cost Flow from Inventory to Cost of Goods Sold

Cost Flow refers to methods available for moving the company’s product cost from Inventory to Cost of Goods Sold. Methods include FIFO and LIFO. Under FIFO, Cost of goods sold would be purchase price of Goods Purchased earlier. Under LIFO cost of goods sold would reflect goods purchased later.

To discuss

The flow of cost from Inventory to Cost of Goods sold under FIFO and LIFO with appropriate examples

Expert Solution & Answer

Explanation of Solution

FIFO(First In First Out) Method:

Under FIFO, Cost of Goods sold will comprise of costs which were undertaken earlier by the company on purchase of a product, and inventory will reflect the cost at its current price. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $45 and $47, whereas Ending Inventory will be valued at $48. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$92($45+$47)

Gross Profit………………………….$108

Balance Sheet

Inventory…………………………….$48

LIFO(First In First Out) Method:

Under LIFO, Cost of Goods Sold will comprise of costs which are most recent and inventory will reflect earlier prices of the product. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $48 and $47, but inventory will be $45. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$95($47+$48)

Gross Profit………………………….$105

Balance Sheet

Inventory…………………………….$45

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 6, Problem 1DQ

To determine

Concept introduction:

Cost Flow from Inventory to Cost of Goods Sold

Cost Flow refers to methods available for moving the company’s product cost from Inventory to Cost of Goods Sold. Methods include FIFO and LIFO. Under FIFO, Cost of goods sold would be purchase price of Goods Purchased earlier. Under LIFO cost of goods sold would reflect goods purchased later.

To discuss

The flow of cost from Inventory to Cost of Goods sold under FIFO and LIFO with appropriate examples

Expert Solution & Answer

Explanation of Solution

FIFO(First In First Out) Method:

Under FIFO, Cost of Goods sold will comprise of costs which were undertaken earlier by the company on purchase of a product, and inventory will reflect the cost at its current price. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $45 and $47, whereas Ending Inventory will be valued at $48. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$92($45+$47)

Gross Profit………………………….$108

Balance Sheet

Inventory…………………………….$48

LIFO(First In First Out) Method:

Under LIFO, Cost of Goods Sold will comprise of costs which are most recent and inventory will reflect earlier prices of the product. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $48 and $47, but inventory will be $45. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$95($47+$48)

Gross Profit………………………….$105

Balance Sheet

Inventory…………………………….$45

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 6, Problem 1DQ

To determine

Concept introduction:

Cost Flow from Inventory to Cost of Goods Sold

Cost Flow refers to methods available for moving the company’s product cost from Inventory to Cost of Goods Sold. Methods include FIFO and LIFO. Under FIFO, Cost of goods sold would be purchase price of Goods Purchased earlier. Under LIFO cost of goods sold would reflect goods purchased later.

To discuss

The flow of cost from Inventory to Cost of Goods sold under FIFO and LIFO with appropriate examples

Expert Solution & Answer

Explanation of Solution

FIFO(First In First Out) Method:

Under FIFO, Cost of Goods sold will comprise of costs which were undertaken earlier by the company on purchase of a product, and inventory will reflect the cost at its current price. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $45 and $47, whereas Ending Inventory will be valued at $48. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$92($45+$47)

Gross Profit………………………….$108

Balance Sheet

Inventory…………………………….$48

LIFO(First In First Out) Method:

Under LIFO, Cost of Goods Sold will comprise of costs which are most recent and inventory will reflect earlier prices of the product. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $48 and $47, but inventory will be $45. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$95($47+$48)

Gross Profit………………………….$105

Balance Sheet

Inventory…………………………….$45

Answer 6

Chapter 6, Problem 1DQ

To determine

Concept introduction:

Cost Flow from Inventory to Cost of Goods Sold

Cost Flow refers to methods available for moving the company’s product cost from Inventory to Cost of Goods Sold. Methods include FIFO and LIFO. Under FIFO, Cost of goods sold would be purchase price of Goods Purchased earlier. Under LIFO cost of goods sold would reflect goods purchased later.

To discuss

The flow of cost from Inventory to Cost of Goods sold under FIFO and LIFO with appropriate examples

Expert Solution & Answer

Explanation of Solution

FIFO(First In First Out) Method:

Under FIFO, Cost of Goods sold will comprise of costs which were undertaken earlier by the company on purchase of a product, and inventory will reflect the cost at its current price. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $45 and $47, whereas Ending Inventory will be valued at $48. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$92($45+$47)

Gross Profit………………………….$108

Balance Sheet

Inventory…………………………….$48

LIFO(First In First Out) Method:

Under LIFO, Cost of Goods Sold will comprise of costs which are most recent and inventory will reflect earlier prices of the product. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $48 and $47, but inventory will be $45. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$95($47+$48)

Gross Profit………………………….$105

Balance Sheet

Inventory…………………………….$45

Answer 7

Chapter 6, Problem 1DQ

To determine

Concept introduction:

Cost Flow from Inventory to Cost of Goods Sold

Cost Flow refers to methods available for moving the company’s product cost from Inventory to Cost of Goods Sold. Methods include FIFO and LIFO. Under FIFO, Cost of goods sold would be purchase price of Goods Purchased earlier. Under LIFO cost of goods sold would reflect goods purchased later.

To discuss

The flow of cost from Inventory to Cost of Goods sold under FIFO and LIFO with appropriate examples

Answer 8

Expert Solution & Answer

Explanation of Solution

FIFO(First In First Out) Method:

Under FIFO, Cost of Goods sold will comprise of costs which were undertaken earlier by the company on purchase of a product, and inventory will reflect the cost at its current price. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $45 and $47, whereas Ending Inventory will be valued at $48. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$92($45+$47)

Gross Profit………………………….$108

Balance Sheet

Inventory…………………………….$48

LIFO(First In First Out) Method:

Under LIFO, Cost of Goods Sold will comprise of costs which are most recent and inventory will reflect earlier prices of the product. Eg. If a product is purchased at prices of $45, $47 and $48, Cost of goods sold will be valued at $48 and $47, but inventory will be $45. It can be demonstrated as below:

Income Statement

Net Sales…………………………….$200

(-)COGS……………………………..$95($47+$48)

Gross Profit………………………….$105

Balance Sheet

Inventory…………………………….$45