1. Chapter 3
Part 3

2. 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

3. 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
2.50
3.00
300
800
January 31st inventory

4. 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
3.00
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

5. 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