1 2 Inventory Definition Inventory is defined as goods held for sale in the normal course of business or items used in the manufacture of products that will be sold in the normal course of business ID: 853365
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1 1 Inventories 2 Inventory Definit
1 Inventories 2 Inventory Definit
2 ion: Inventory is defined as good
ion: Inventory is defined as good
3 s held for sale in the normal cou
s held for sale in the normal cou
4 rse of business or items used in
rse of business or items used in
5 the manufacture of products that
the manufacture of products that
6 will be sold in the normal cour
will be sold in the normal cour
7 se of business 6 The Ins
se of business 6 The Ins
8 48; and Outs of Inve
48; and Outs of Inve
9 ntory Accounting The ins
ntory Accounting The ins
10 48;of inventory accounting The &
48;of inventory accounting The &
11 #147;outsof inventory acco
#147;outsof inventory acco
12 unting Cost of goods available fo
unting Cost of goods available fo
13 r saleCost of goods soldEndinginv
r saleCost of goods soldEndinginv
14 entory Acquisition costs Beginnin
entory Acquisition costs Beginnin
15 g inventory BInv+ Purchases = COG
g inventory BInv+ Purchases = COG
16 AS = COGS + EInv 56 LIFO versus F
AS = COGS + EInv 56 LIFO versus F
17 IFO COGS Equating right hand side
IFO COGS Equating right hand side
18 of LIFO and FIFO equations, COGS
of LIFO and FIFO equations, COGS
19 LIFO-COGSFIFO= (EndInvFIFO
LIFO-COGSFIFO= (EndInvFIFO
20 EndInvLIFO) (BegInvFIFO-Beg
EndInvLIFO) (BegInvFIFO-Beg
21 InvLIFO) + = End LIFO reserve
InvLIFO) + = End LIFO reserve
22 150; Beg LIFO reserve 57 Footnote
150; Beg LIFO reserve 57 Footnote
23 Disclosures Kmart, 2001 In
Disclosures Kmart, 2001 In
24 ventories are stated at the lower
ventories are stated at the lower
25 of cost or market, primarily usi
of cost or market, primarily usi
26 ng the retail method. The last-in
ng the retail method. The last-in
27 , first-out ("LIFO") method, util
, first-out ("LIFO") method, util
28 izing internal inflation indices,
izing internal inflation indices,
29 was used to determine the cost f
was used to determine the cost f
30 or $5,537, $6,104 and $6,690 of i
or $5,537, $6,104 and $6,690 of i
31 nventory as of fiscalyear end 200
nventory as of fiscalyear end 200
32 1, 2000 and 1999, respectively.
1, 2000 and 1999, respectively.
33 Inventories valued on LIFO were $
Inventories valued on LIFO were $
34 269, $194 and $202 lower than amo
269, $194 and $202 lower than amo
35 unts that would have been reporte
unts that would have been reporte
36 d using the firstin, first out ("
d using the firstin, first out ("
37 FIFO") method at fiscal year end
FIFO") method at fiscal year end
38 2001, 2000 and 1999, respectively
2001, 2000 and 1999, respectively
39 . Vacu-Dry, 1996 During 199
. Vacu-Dry, 1996 During 199
40 6, the company liquidated certain
6, the company liquidated certain
41 LIFO inventories that were carri
LIFO inventories that were carri
42 ed at lower costs prevailing in p
ed at lower costs prevailing in p
43 rior years. The effect of this li
rior years. The effect of this li
44 quidation was to increase earning
quidation was to increase earning
45 s before income taxes by $ 642,00
s before income taxes by $ 642,00
46 0 ($384,000 increase in net earni
0 ($384,000 increase in net earni
47 ngs). 58 Analyzing Footnote Discl
ngs). 58 Analyzing Footnote Discl
48 osures Kmart What is the value of
osures Kmart What is the value of
49 tax savings to Kmart from using
tax savings to Kmart from using
50 LIFO? (COGSLIFOCOGSFIFO)*(t
LIFO? (COGSLIFOCOGSFIFO)*(t
51 ax rate) = (Change in LIFO reserv
ax rate) = (Change in LIFO reserv
52 e)*tax rate = (269-194)*0.40 = 30
e)*tax rate = (269-194)*0.40 = 30
53 Vacu-Dry Assume change in LIFO
Vacu-Dry Assume change in LIFO
54 reserve = $100,000 What is the di
reserve = $100,000 What is the di
55 fference between COGSLIFOand COGS
fference between COGSLIFOand COGS
56 FIFOthat solely reflects a change
FIFOthat solely reflects a change
57 in costs of goods produced? (COG
in costs of goods produced? (COG
58 SLIFOCOGSFIFO) = 100,000 Wh
SLIFOCOGSFIFO) = 100,000 Wh
59 at (COGSLIFOCOGSFIFO) would
at (COGSLIFOCOGSFIFO) would
60 have been without LIFO liquidati
have been without LIFO liquidati
61 on = (100+642) = 742,000 Given:
on = (100+642) = 742,000 Given: