Chapter 3 Part 3.

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Presentation transcript:

Chapter 3 Part 3

INVENTORY Consists of goods purchased or made and held for resale Most health care only carry a small portion in inventory Provide services not sell goods Except for: Pharmacies and medical supply firms Difficult to value Use a lot of goods and hard to determine how much of each individual unit (example, gloves) Value of inventory has to be presented in dollar terms FIFO or LIFO Affects value of inventory but also the cost of goods sold Cost of goods sold = Beginning inventory + Net purchases – Ending Inventory

Table 3-10 HHSC : Determining cost of goods sold; first in-first-out inventory method Opened on January 2nd with no inventory January 5th = Purchased, cash, 200 frozen meals to be resold to its clients = $2.50 January 20th = purchased, 200 more meals, now price is risen to $3.00 January 31, inventory found 100 meals Date Quantity Price/Unit Total Value January 5th 200 2.50 500 January 20th 3.00 600 Available for sale in January 400   1,100 Minus January 31 100 - Sold in January 200 @ 2.50 100 @ 3.00 300 800 January 31st inventory

Table 3-11 Date Quantity Price/Unit Total Value January 5th 200 2.50 500 January 20th 3.00 600 Available for sale in January 400   1,100 Minus January 31 100 - Sold in January 200 @ 3.00 100 @ 2.50 300 850 January 31st, inventory 250 HHSC : determining cost of goods sold; last-in first-out inventory method Opened on January 2nd with no inventory January 5th = Purchased, cash, 200 frozen meals to be resold to its clients = $2.50 January 20th = purchased, 200 more meals, now price is risen to $3.00 January 31, inventory found 100 meals

Which one do you use? Organization’s choice Doesn’t truly reflect on how organizations are using their inventory, just an accounting method Use depends on what they are looking towards doing? Tax value or Investor value