2. INVENTORIES Ag Business Management Spring 1999

3. Objectives zExplain the importance of an accurate inventory. zDetermine when to inventory assets. zIdentify assets to be included in an inventory. zDescribe the method used to determine value.

4. Glossary zACRS zAcquisitions zAsset zCash accounting zCapital zCapital gains zCollateral z Consumable supplies z Contingent liabilities z Credit z Depreciable assets z Depreciation

5. Glossary zDepreciation methods zDepreciation system zEstate tax zFinancial statement z Fiscal year z Gift tax z Income statement z Inheritance tax z Inventory z MACRS z Non-depreciable asset

6. Glossary zOwner-equity statement zSalvage value zStraight line method zUseful life

7. Why Inventories are Important zOwner Equity Statements zIncome Statements zObtaining Credit zInsurance zEstate Planning zTax Management

8. Owner Equity Statements zShow an accurate account of financial standing at a specific point in time. zCannot develop balance sheet without completed inventory.

9. Income Statements zInventory needed to calculate income statement. zChanges in inventory affect income.

10. Obtaining Credit zFinancial institutions need accurate inventories before granting credit. zAssets may be used as collateral to secure loan.

11. Insurance zInventories needed to determine premium cost & coverage. zInventories needed to determine payment in event of loss or damage.

12. Estate Planning zNeeded to plan an estate. zAlways necessary in settlement situations.

13. Tax Management zInventory management key in tax management strategies. zEspecially important with property tax valuation & capital gains tax.

14. Items to be Inventoried zItems for resale zConsumable supplies zCapital Assets

15. Inventories

18. How to Determine Inventory Values zCost Minus Depreciation zCurrent Market Value zStraight Line Depreciation zAccelerated Cost Recovery System (ACRS) zModified Accelerated Cost Recovery System (MACRS)