Need Accounting Help
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Joined: Aug 2002
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From: 49th Parallel
Need Accounting Help
Well, studying for exams, and I really hate accounting, but need to pass it to go on in my program.. but I just can't seem to grasp the concepts like I can in other business related courses.
Anyways, we are doing the LIFO/FIFO cost methods, but the text doesn't explain it very well, and I can't understand the example.
It says FIFO: Inventory costing method by which the first costs into inventory are the first costs outs to cost of goods sold. Ending inventory is based on the costs of the most recent purchases.
Then gives an illustrative example and computes the cost of goods sold and ending inventory given beginning inventory and purachases and all that
And LIFO, basically has the same definition and example cept last -in, first out.
I really have no idea what they mean.. I can do weighted average cost method, and perpetual system fine, the more basic ones, but don't understand this..
Anyways, we are doing the LIFO/FIFO cost methods, but the text doesn't explain it very well, and I can't understand the example.
It says FIFO: Inventory costing method by which the first costs into inventory are the first costs outs to cost of goods sold. Ending inventory is based on the costs of the most recent purchases.
Then gives an illustrative example and computes the cost of goods sold and ending inventory given beginning inventory and purachases and all that
And LIFO, basically has the same definition and example cept last -in, first out.
I really have no idea what they mean.. I can do weighted average cost method, and perpetual system fine, the more basic ones, but don't understand this..
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Joined: Dec 2004
Posts: 143
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From: NJ
I've been lurking here for a long time and figured I'd register to help you out...
FIFO:
The FIRST inventory received is the first inventory to be sold.
LIFO:
The LAST inventory received is the first to be sold. Take this example to account...
1/1/04 Purchase 6,000 units at $2 a pop (6,000 @ $2) $12,000
2/5/04 Purchase 2,000 units at $3 a pop (2,000 @ $3) $6,000
3/10/04 Sold 4,000 units at ?
The question arises at what dollar amount should your Cost of Goods Sold (COGS) be?
If your using FIFO, you would use the inventory that arrived first (you'd sell 4,000 units at a cost of $2; making your COGS 8,000).
If your using LIFO, you would use the inventory that you most recently aquired (you'd sell all 2,000 units at $3 and sell 2,000 at the $2 price; making your COGS 10,000)
I'm not going to even get into LIFO liquidation, LIFO reserve, tax implications of both methods etc...
Good Luck!
Chris
P.S. I've been studying for my Intermediate Accting and Cost Accting classes all day too!
FIFO:
The FIRST inventory received is the first inventory to be sold.
LIFO:
The LAST inventory received is the first to be sold. Take this example to account...
1/1/04 Purchase 6,000 units at $2 a pop (6,000 @ $2) $12,000
2/5/04 Purchase 2,000 units at $3 a pop (2,000 @ $3) $6,000
3/10/04 Sold 4,000 units at ?
The question arises at what dollar amount should your Cost of Goods Sold (COGS) be?
If your using FIFO, you would use the inventory that arrived first (you'd sell 4,000 units at a cost of $2; making your COGS 8,000).
If your using LIFO, you would use the inventory that you most recently aquired (you'd sell all 2,000 units at $3 and sell 2,000 at the $2 price; making your COGS 10,000)
I'm not going to even get into LIFO liquidation, LIFO reserve, tax implications of both methods etc...
Good Luck!
Chris
P.S. I've been studying for my Intermediate Accting and Cost Accting classes all day too!
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Joined: Jul 2001
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From: Yorba Linda, CA
Reaching way, way back into my past, I recall that common questions asked about FIFO vs. LIFO are on the order of:
In periods of rising manufacturing costs, which method leads to:
higher COGS? (LIFO)
lower COGS? (FIFO)
higher net income? (FIFO)
lower net income? (LIFO)
greater total assets? (FIFO, higher inventory valuation)
lesser total assets? (LIFO)
and so on.
Yuck!
In periods of rising manufacturing costs, which method leads to:
higher COGS? (LIFO)
lower COGS? (FIFO)
higher net income? (FIFO)
lower net income? (LIFO)
greater total assets? (FIFO, higher inventory valuation)
lesser total assets? (LIFO)
and so on.
Yuck!
Joined: Oct 2000
Posts: 17,288
Likes: 39
From: Nashville
Who the 
uses any of those methods in real life anyway? We use straight line for book and macrs (which are both calculated by a computer anyway) for tax.....
i guess you should learn, just in case the computer breaks.
uses any of those methods in real life anyway? We use straight line for book and macrs (which are both calculated by a computer anyway) for tax.....i guess you should learn, just in case the computer breaks.
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Joined: Oct 2000
Posts: 17,288
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From: Nashville
Mt. Dew tabs, not box tops.....
ahhaha... i did pass the stupid exam, but have never been able to endure CPA's long enough to get the experience required....(3200 hours)....blaaaa.....
Originally Posted by magician,Dec 12 2004, 08:25 PM
Are you saying you unofficially got your CPA license?
Exactly how many cereal-box tops does that take?
Exactly how many cereal-box tops does that take?
ahhaha... i did pass the stupid exam, but have never been able to endure CPA's long enough to get the experience required....(3200 hours)....blaaaa.....
