《实用会计英语》（第四版）教学课件 PPT chapter5.ppt

5.3 Inventory Costing Methods Method 3: First-in, first-out (FIFO) cost Under the first-in, first-out (FIFO) method, the company must keep a record of the cost of each inventory unit purchased. The unit costs for ending inventory may differ from the unit costs used to compute the cost of goods sold. Under FIFO, The first costs into inventory are the first costs out to Cost of Goods Sold. Ending inventory is based on the costs of the most recent purchases. 高等教育出版社 * 5.3 Inventory Costing Methods Method 4: Last-in, first-out (LIFO) cost The Last-in, First-out (LIFO) method also depends on the costs of particular inventory purchases. LIFO is the opposite of FIFO. Under LIFO, The last costs into inventory are the first costs out to Cost of Goods Sold. Ending inventory is based on the oldest cost –those of beginning inventory and plus the earliest purchases of the period. 高等教育出版社 * 5.3 Inventory Costing Methods Method 5: Lower-of-cost-or-market rule Lower-of-Cost-or-Market Rule is another method to value inventory. It shows accounting conservatism in action. [5]LCM requires that inventory be reported in the financial statements at whichever is lower—the inventory’s historical cost or its market value. For inventories, market value generally means current replacement cost (that is, the cost to replace the inventory on hand). 高等教育出版社 * 5.3 Inventory Costing Methods Method 5: Lower-of-cost-or-market rule 高等教育出版社 * 5.3 Inventory Costing Methods The income effects of FIFO, LIFO, and weighted-average cost In our example, the cost of inventory rose during the accounting period from $10 per unit to $14 and finally to $18. When inventory unit costs change, the different costing methods produce different cost of goods sold and ending inventory figures. When inventory unit costs are increasing, FIFO ending inventory is highest because it is priced at the most recent costs. LIFO ending inventory is lowest because it is priced at the oldest costs; when inventory unit costs are dec