Valuation of Inventory

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Presentation transcript:

Valuation of Inventory Section 8.4 Valuation of Inventory

Average Inventory Sum of inventories divided by # of items in inventory Inventory on Sept 1 was $76,822 and on Sept 30 it was $43,280. Find the average inventory.

Stock Turnover Turnover = Retail Sales_____ at retail Avg. Inventory at retail Turnover = Cost of goods sold___ at cost Avg. Inventory at cost

In July, Painters Supply has an average retail inventory of $26,528 and retail sales of $183,308. Find the stock turnover at retail. If the cost of goods sold by Painters Supply (above) was $150,348 and the average inventory at cost was $21,820, find the stock turnover at cost.

Inventory value using Weighted Average method Find the average cost of a single item. Multiply each # of items by the price. Add those products Divide by the total # of items Multiply that average cost by the number of items remaining in inventory.

Olympic Sports made the following purchases Olympic Sports made the following purchases. Find the inventory if there are 85 bicycles at the end of the year. # of bicycles Cost each Beginning 20 $115 February 30 $95 April 50 $100 June 40 $110 August 80 $105 November 60 $130

FIFO = First In, First Out Assumes a natural flow of goods. The items at the end of the year were the last items to arrive. Use FIFO method to find the inventory value of the 85 bicycles from Olympic Sports.

LIFO = Last In, First Out Assumes the opposite flow of good fro FIFO. The items left at the end of the year were from the first to arrive. Use LIFO method to find the inventory value of the 85 bicycles from Olympic Sports.

Estimate Inventory ~Retail Method The cost of goods available for sale is found as a % of the retail value of goods available for sale. Then, % is multiplied by the retail value of inventory at the end of the period. This gives an estimate of the inventory at cost.

At the end of June, Solar Solutions had an inventory of $87,500 at cost and $125,000 at retail. During the next 3 months, there were purchases of $103,200 at cost, $147,600 at retail, and net sales were $185,000. Use the retail method to estimate the value of inventory at cost at the end of September.