CHAPTER 8 Valuation of Inventories: A Cost Basis Approach ……..…………………………………………………………... Issues  types of inventory  perpetual vs periodic systems  goods.

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CHAPTER 8 Valuation of Inventories: A Cost Basis Approach ……..…………………………………………………………... Issues  types of inventory  perpetual vs periodic systems  goods to be included in inventory  costs to be included

A/P Periodic Inventory Sales 0 1,300 Inventory 55 Retained Earn 320 Cost Goods Sold 0 Purchases Year-end adjusting entry: Inventory55 Inventory80 35 Purchases925 Cost of Goods Sold900

What Impact? Purchases recorded properly but the count of ending inventory overstated it by $10. A/P Sales 0 1,300 Inventory 55 Retained Earn 320 Cost Goods Sold 0 Purchases , ,300900

What Impact? Ending inventory is correct but $8 of next year’s purchases were recorded in the current year. A/P Sales 0 1,300 Inventory 55 Retained Earn 320 Cost Goods Sold 0 Purchases , ,300900

What Impact? $5 of inventory was improperly recorded as a purchase in the current year and improperly included in ending inventory. A/P Sales 0 1,300 Inventory 55 Retained Earn 320 Cost Goods Sold 0 Purchases , ,300900

Average Cost - Periodic 150 x $39=$5, x $43 = $19, x $44 = $17,600 1,000 x $42.80 = $42,800 CGS = End Inv =

Average Cost - Perpetual PurchasesSoldBalance 150 x $39=$5, x $43 = $19, x $44 = $17,600 CGS =End Inv =

FIFO - Periodic 150 x $39=$5, x $43 = $19, x $44 = $17,600 CGS = End Inv =

FIFO – Perpetual Inventory PurchasesSoldBalance 150 x $39=$5, x $43 = $19, x $44 = $17,600 CGS =End Inv =

LIFO - Periodic 150 x $39=$5, x $43 = $19, x $44 = $17,600 CGS = End Inv =

LIFO – Perpetual Inventory PurchasesSoldBalance 150 x $39=$5, x $43 = $19, x $44 = $17,600 CGS =End Inv =

Dollar-Value LIFO $100,000  calculate base-year value of total inventory 12/31/00 Index=100 12/31/01 Index=110 12/31/02 Index=116 Cur ValueB-Y Value $123,200 $134,560  use base-year values to identify LIFO layers LIFO layers 12/31/03 Index=118 $123,900

Whose inventory? Z Goods in transit (W shipped to Z f.o.b. destination). W Z takes goods from W on consignment. W sells goods to Z with an agreement to repurchase at a set price. W sells goods to Z, estimating that 35% of them will be returned. W completes special-order goods for Z but has not yet delivered them.