Lt Reflection Week 4 Acc 290

Week 4 Reflection

Learning Team A

ACC/290

December 10, 2012

Steven McAlister

Week 4 Learning Objectives:

Analyze the elements in the cost of goods sold calculation.

The cost of goods sold is the cost of the merchandise sold. To calculate, you add the beginning inventory and the inventory purchased for that time period. This gives you the cost of goods available for sale. Out of those goods, the total costs of the goods sold are the cost of goods sold. The goods not sold are the ending inventory. On a multistep income statement the cost of goods sold must be subtracted from the net sales to calculate the gross profit (Kimmel, Weygandt, and Kieso, Chapter 5, 2010).

Record the transactions that involve the purchase and sale of merchandise.

To record a purchase, merchandise inventory is increased, and either accounts payable is increased or cash is decreased, depending on payment is made (Kimmel, Weygandt, and Kieso, Chapter 5, 2010).

To record a sale, you have to make four journal entries. Sales are increased, as well as cash or accounts receivable. Also, merchandise inventory is decreased and cost of goods sold is increased (Kimmel, Weygandt, and Kieso, Chapter 5, 2010).

Calculate ending inventory value using the LIFO, FIFO, and average cost methods.

The three types of cost flow assumptions are:

1. First in, first out (FIFO)

2. Last in, first out (LIFO)

3. Average cost.

FIFO works by saying the first inventory in was the first out. So, the cost of the inventory sold would be the cost of the first items purchased and work through each purchase for the time period. The cost of the inventory not sold and kept for the next period would be the most recent prices (Kimmel, Weygandt, and Kieso, Chapter 5, 2010).

LIFO works by saying the last inventory in was the first out. So, the cost of the inventory sold would be the cost of the last items purchased and work backwards through the time period. The cost of the inventory not...