EXAM 1 - ACT 202

Whats contained in a multistep income statement?

• Sales

• Gross profit

• Operating Expenses

• Non operating activities

• Net income

Perpetual COGS formula

Beginning Inventory

Plus Purchases* (the net cost to acquire/receive the inventory)

Equals Goods Available for Sale

Goods Available for Sale

Less Cost of the Goods Sold (recorded after every sale)

Equals Ending Inventory

Periodic COGS Formula

Beginning Inventory

Plus Purchases (the net cost to acquire/receive the inventory)

Equals Goods Available for Sale

Goods available for Sale

Less Ending Inventory (physical count at end of period)

Equals Cost of Goods Sold

Net Income equation

Net Income=Revenue−Expenses

Gross Profit Equation

Gross Profit=Sales Revenue−Cost of Goods Sold (COGS)

FOB Shipping point

Buyer owns when being shipped

FOB Destination

Buyer owns when it arrives

LIFO

Amount paid for last purchases made are applied to the

first goods sold in a period

FIFO

Amount paid for first purchases made are applied to the

first goods sold in a period

AVERAGE COST

The average cost of all purchases made during a

period is applied to all goods sold and to ending inventory too!