Valuation of Inventories

ACC311

Inventory for Merchandisers

Merchandise Inventory

Inventory for Manufacturers

RM, WIP, FG

Periodic Inventory

Purchases

Accounts Payable

Cash

Sales Revenue

Perpetual Inventory

Inventory

Accounts Payable

Cash

Sales Rev

COGS

Merchandise Inventory

Understating inventory

Understates Income

FOB

Freight on board

FOB Shipping Point

Title of goods passees when goods are shipped

FOB Destination

title of goods passes when received

Consignment

The supplier of the goods places goods in the retailer’s place of business but the title remains with the supplier

Consignor

supplier; includes inventory

Consignee

Possess goods; not include inventory

Net Purchases

Purchases

+Freight in, import fees, costs to prep for sale

-Purchase returns and allowances, discounts,

Annual Return Calculation

dicount/1-discount * 365/days early

Gross vs. Net

Net but gross more popular

Financial Reporting

FIFO better

Taxes

LIFO Better

LIFO Reserve Elements

Inventory at FIFO + Allowance to Reduce Inventory to LIFO - Inventory at LIFO for Financial Reporting

Periodic LIFO

Ignore dates!!!

Periodic Returns

Credit Purchase Returns not Purchases

Perpetual Returns

Credit Inventory