1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 6-2 Inventory Costing FIFO inventory costing method LIFO inventory costing method Weighted-average costing method Lower of cost or market inventory costing method

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Competency: Accounting Adjustments and Valuation/Inventory Planning and Distribution Objectives 38. Verify inventory quantities, using physical methods. 39. Maintain inventory records, using perpetual methods. 40. Determine cost of merchandise inventory valuation, using current costing methods. 41. Compare inventory costing methods. 42. Calculate turnover ratios. 43. Analyze obsolete, damaged, and slow-moving inventory. 44. Identify security considerations related to inventory. 2 LESSON 6-2

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 3 LESSON 6-2 1.Assign units from most recent purchase. 2.Assign units from next most recent purchase. 3.Multiply ending inventory units by unit price. 4.Total the ending inventory columns. FIRST-IN, FIRST-OUT INVENTORY COSTING METHOD page 176 1 2 3 4

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 4 LESSON 6-2 1.Assign units from earliest purchase. 2.Assign units from next earliest purchase. 3.Multiply ending inventory units by unit price. 4.Total the ending inventory columns. LAST-IN, FIRST-OUT INVENTORY COSTING METHOD page 177 1 2 4 3

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 6-2 WEIGHTED-AVERAGE INVENTORY COSTING METHOD page 177

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 6-2 COSTING INVENTORY DURING PERIODS OF INCREASING PRICES page 178

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 6-2 COSTING INVENTORY DURING PERIODS OF DECREASING PRICES page 179

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 6-2 RESULTS OF THE THREE INVENTORY COSTING METHODS COMPARED page 179

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 6-2 1.Calculate the cost. 2.Calculate the market price. 3.Determine the smaller number to use as the lower of cost or market amount. LOWER OF COST OR MARKET INVENTORY COSTING METHOD page 180 123

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 LESSON 6-2 TERMS REVIEW first-in, first-out inventory costing method last-in, first-out inventory costing method weighted-average inventory costing method lower of cost or market inventory costing method page 181