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Module 1: Avaliação e gravação das ações

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Distinguir entre FIFO e custos identificados

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Accounting - Distinguishing between FIFO and identified cost

Distinguishing between FIFO and identified cost

FIFO ("first in - first out") and identified cost are approaches to
measuring the "cost" of stock on hand at the end of the accounting period.
The problem occurs when stock is bought in batches during the period at
different prices. The business must decide which stock is on hand from
which batch.

FIFO method - cost of units removed from inventory is assumed to be from
the first units available for sale at the time of each sale.

Identified cost is where the particular batch from which goods are sold is
identified. This is relevant when batches of goods are bought at different
prices and the identification of actual cost price is considered important.
It is possible for items from different batches to be sold in the one
transaction. Identification of individual stock items is made possible by
electronic measuring devices such as the use of barcodes.

Accounting alternatives

Example: In the year ended 31 December smoke detectors are bought in batches:

January
10 smoke detectors at $15 each

May
20 smoke detectors at $17 each

August
15 smoke detectors at $18 each

November
20 smoke detectors at $20 each

A stock take revealed that 25 smoke detectors are on hand at 31 December.

The stock was identified as coming from the following batches:

January - 3, May - 10, August - 5 and November 7.

Required

Calculate stock on hand for both FIFO and identified cost.

FIFO
= $400 (20 x $20) + $90 (5 x $18) = $490

Identified cost
= $45 (3 x $15) + $170 (10 x $17) + $90 (5 x $18) + $140 (7 x $20) =
$445

In their response students should go on to say that FIFO has exceeded the
valuation of identified cost for stock by $45. Stating the actual dollar
amount is important.

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