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Finally, our last one! And then we are going to eat dinner!
Something fun, like grade some papers or make a pencast?
LIFO- Last in, first out!
This is going to give us different results, isn't it?
Because now
we are going to take the ones that Maggie bought LAST
and costing them as sold first.
As Cost of goods sold.
So the last ones in, the ones that she bought last,
are the ones we are going to apply to the cost of goods sold.
of the income statement.
And the first ones that she bought
are still going to be on the....
Balance sheet.
I have said a lot of stuff so you better be reading about this.
I have taped up
a little demonstration of LIFO over
where I had FIFO.
So it will be the Opposite to FIFO, won't it?
It still has to add to
Still have the same chart at the top of the screen.
The 47.26 is still the Cost of Goods Available for sale.
LIFO, means the Last ones in
The latest ones we bought, the 48
at $.32 = 15.36
become part of cost of goods sold.
They go out the door first.
NOW remember: physically they don't go out the door
We don't care from an accounting standpoint
about the physical flow
This is just an accounting thing. We are talking about.
we are just talking about what we are going to assign the cost to.
After taking the 48 out, that leaves only 2, that we have to assign cost to.
We take it from that middle layer and 2 will be costed at $.35
so $.70.
We add these together,
and that is 16.06, which is Cost of Goods sold.
Now that's not the same as the Cost of goods sold in Fifo.
Let's take a peak.
In FIFO, COGS was 19.30.
So it is a different amount.
In the Ending inventory for LIfO:
I am talking about now
What is staying Here?
So, Let's think. If LIFO means
Last in first out to be sold,
what stays here?
The OLDEST ones.
The first ones stay here.
Which ones were the first ones?
They were that 36 she bought on Aug.1
at $.40
The first ones she went to the store and bought
are a total of $14.40 and they are still here.
And we need to find a total of 84 in Ending inventory.
So if you take 84 - 36
you get 48
48 out of that middle layer
which costs $.35
is 16.80.
When I add the two calculations together
that is going to give me Ending inventory.
And it is NOT the same as FIFO Ending inventory.
Because FIFO was a different number.
But altogether I have accounted for that
47.26.
So either way I do it
or any of the ways I do it
I still have to account for the 47.26.
In LIFO remember, it costs the last ones in
and puts them on the Income Statement.
The latest ones in Lifo go to the Income Statement.
And the earliest costs stay on the Balance sheet
Put that in your brain.
But in FIFO, the one we did before now in the last video
which is very commonly thought of as far as milk and
perishables, (but that is the physical flow)
FIFO puts the earliest ones on the Income statement. So, we sold the milk
They put that milk that is oldest at the front, right?
But remember, it doesn't have to line up with physical, I am just giving you a mental picture.
First ones in, first ones sold.
And the last ones in the fifo method are Still here.
Do you understand that?
What you will find when you line these up
Is that right in the middle is weighted average!
Because that is what averages do.
So this should give you a start, we will do some more in class!!