1. 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

2. A/P 932 42 925 Periodic Inventory Sales 0 1,300 Inventory 55 Retained Earn 320 Cost Goods Sold 0 Purchases 0 925 Year-end adjusting entry: Inventory55 Inventory80 35 Purchases925 Cost of Goods Sold900

3. What Impact? Purchases recorded properly but the count of ending inventory overstated it by $10. A/P 932 42 925 Sales 0 1,300 Inventory 55 Retained Earn 320 Cost Goods Sold 0 Purchases 0 925 5580 925 900 3580 1,300 900 1,300900

4. What Impact? Ending inventory is correct but $8 of next year’s purchases were recorded in the current year. A/P 932 42 925 Sales 0 1,300 Inventory 55 Retained Earn 320 Cost Goods Sold 0 Purchases 0 925 5580 925 900 3580 1,300 900 1,300900

5. What Impact? $5 of inventory was improperly recorded as a purchase in the current year and improperly included in ending inventory. A/P 932 42 925 Sales 0 1,300 Inventory 55 Retained Earn 320 Cost Goods Sold 0 Purchases 0 925 5580 925 900 3580 1,300 900 1,300900

6. Average Cost - Periodic 150 x $39=$5,850 450 x $43 = $19,350 400 x $44 = $17,600 1,000 x $42.80 = $42,800 CGS = End Inv =

7. Average Cost - Perpetual PurchasesSoldBalance 150 x $39=$5,850 450 x $43 = $19,350 400 x $44 = $17,600 CGS =End Inv =

8. FIFO - Periodic 150 x $39=$5,850 450 x $43 = $19,350 400 x $44 = $17,600 CGS = End Inv =

9. FIFO – Perpetual Inventory PurchasesSoldBalance 150 x $39=$5,850 450 x $43 = $19,350 400 x $44 = $17,600 CGS =End Inv =

10. LIFO - Periodic 150 x $39=$5,850 450 x $43 = $19,350 400 x $44 = $17,600 CGS = End Inv =

11. 200 500 LIFO – Perpetual Inventory PurchasesSoldBalance 150 x $39=$5,850 450 x $43 = $19,350 400 x $44 = $17,600 CGS =End Inv =

12. 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

13. 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.