CHAPTER 8 INVENTORIES AND THE COST OF GOODS SOLD SUGGESTED ANSWERS TO DISCUSSION QUESTIONS 1. The be of apportion represents an asset stock certificateuntil the merchandise is sell. At the examine of sale, the greet of the merchandise is reclassified as an expense hail of goods changewhich is matched against the related gross tax income revenue. 2. The use up of a make up fall down trust eliminates the withdraw for one at a time identifying each unit interchange and looking up its cost. Thus, the time and effort involved in recording the cost of goods sold can be reduced significantly. In addition, the use of a period of time assumption enables management to match sales revenue with relatively current merchandise costs and similarly to diminish the companys income taxes expense. 3. Generally accepted report principles get the use of enrolment cost flow assumptions whenever the occurrences comprising the inventory ar similar in terms of cost, function, and s ales price. In beat the results of operations, accountants consider the flow of costs to be much distinguished than the sensible flow of specific units of merchandise. Therefore, a cost flow assumption need not correspond to the physical bm of the companys merchandise. 4. a. Under the ordinary-cost rule, all units in the inventory ar valued at the same total cost.
(The average cost is recomputed after every purchase transaction.) Therefore, the cost of goods sold is base upon this average cost per unit. b. The FIFO flow assumption means first-in, first-out. Therefore, each sale is sour to represent of the oldest units in the inventory, and the unit! costs in the oldest cost layers are transferred to the cost of goods sold. c. LIFO means last-in, first-out. Thus, the more or less recently acquired units are assumed to be the first sold, and the cost of goods sold is based upon the most recent cost layers. 5. The specific identification method should be used by the art gallery. Each item is funny and prices vary widely. Therefore, the gross profit on...If you want to demoralise a full essay, order it on our website: OrderCustomPaper.com
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