Best Teaching Practices 11 TH Annual Accounting Educators’ Seminar Linda Bell William Jewell...
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Best Teaching Practices 11 TH Annual Accounting Educators’ Seminar Linda Bell William Jewell College
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Best Teaching Practices 11TH Annual Accounting Educators’ Seminar
Linda BellWilliam Jewell College
Inventory Costing Demonstration Using Candy
Inventory
BI+ P_____________________
GASCGS
_____________________
EI
M&M Store
Purchases:1) 8 Brown/Red ($2 each) 2) 7 Blue/Green ($3 each)3) 5 Yellow/Orange ($4 each)
20 Total M&Ms
Sold: 12 ($5 Sales Price)(Assume 4 of each
group)
Outside
Goods Available for Sale Assignment of Cost to Goods Sold and Ending Inventory
Total Specific Identification Method
Unit # of Cost CGS EI
Cost Units Available # $ # $
BI $0 0 $0
P1
P2
P3
GAS Totals
$ 2
$ 3
$ 4
8
7
5
$16
$21
$20
20 $57
4
4
4
4
3
1
$ 8 $ 8
$12 $ 9
$16 $ 4
12 8$36 $21
M&M Store
Purchases:1) 8 Brown/Red ($2 each) 2) 7 Blue/Green ($3 each)3) 5 Yellow/Orange ($4 each)
20 Total M&Ms
Sold: 12 ($5 Sales Price)(Assume FIFO)
Outside
FIFO Cost Flow Assumption
Goods Available for Sale Assignment of Cost to Goods Sold and Ending Inventory
Total First-In First-Out (FIFO) Method
Unit # of Cost CGS EI
Cost Units Available # $ # $
BI $0 0 $0
P1
P2
P3
GAS Totals
$ 2
$ 3
$ 4
8
7
5
$16
$21
$20
20 $57
8
4
0
0
3
5
$ 16 $ 0
$ 12 $ 9
$ 0 $20
12 8$28 $29
M&M Store
Purchases:1) 8 Brown/Red ($2 each) 2) 7 Blue/Green ($3 each)3) 5 Yellow/Orange ($4 each)
20 Total M&Ms
Sold: 12 ($5 Sales Price)(Assume LIFO)
Outside
LIFO Cost Flow Assumption
Goods Available for Sale Assignment of Cost to Goods Sold and Ending Inventory
Total Last-In First-Out (LIFO) Method
Unit # of Cost CGS EI
Cost Units Available # $ # $
BI $0 0 $0
P1
P2
P3
GAS Totals
$ 2
$ 3
$ 4
8
7
5
$16
$21
$20
20 $57
0
7
5
8
0
0
$ 0 $ 16
$ 21 $ 0
$ 20 $ 0
12 8$41 $16
M&M Store
Purchases:1) 8 Brown/Red ($2 each) 2) 7 Blue/Green ($3 each)3) 5 Yellow/Orange ($4 each)
20 Total M&Ms
Sold: 12 ($5 Sales Price)(Assume Weighted Average)
Outside
Goods Available for Sale Assignment of Cost to Goods Sold and Ending Inventory
Total Weighted Average Method
Unit # of Cost CGS EI
Cost Units Available # $ # $
BI $0 0 $0
P1
P2
P3
GAS Totals
$ 2
$ 3
$ 4
8
7
5
$16
$21
$20
20 $57 12 8$34.20 $22.80
$57/20 = $2.85 12 X $2.85 = $34.20 8 X $2.85 = $22.80
So what?
Specific Weighted
Income Statement Identification FIFO LIFO Average
Sales (12 units @ $_____) $ $ $ $
Cost of Goods Sold
Gross Profit
Operating Expenses 10 10 10 10
Income before Taxes
Income Tax Expense (assume 30%)
Net Income $ $ $ $
5 60 60 60 60
36 28 41 34
24 32 19 26
2214 9 16 4 7 3 5
10 15 6 11
Her
e’s
Wh
at
There’s more…
Specific Weighted
Balance Sheet Identification FIFO LIFO Average
Current Assets:
Inventory (Ending) $ $ $ $
Stockholders' Equity:
Retained Earnings $ $ $ $
21 29 16 23
10 15 6 11
Specific Weighted
Statement of Cash Flows Identification FIFO LIFO Average
Cash paid for income taxes $ $ $ $
(Assume all income taxes were paid)
And
finall
y…4 7 3 5
The reality is that in all cases 20 pieces of candy were purchased and 12 were sold. The different financial results are merely cosmetic.
Conclusion:
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Thank you for your attention!
Any Questions?
