Class 6.1 Slides_LCM_LCNRV_Instructor (1).pptx

Class 6.1 Slides_LCM_LCNRV_Instructor (1).pptx - BUS-A310...

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BUS-A310 Unit 2: Balance Sheet - Assets
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CLASS 6.1 Chapter 9: Inventories – Additional Issues
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LEARNING OBJECTIVE At the end of this lesson, you should be able to: Apply the rules used by accountants to measure the value of ending inventory [CO5a] 3
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INVENTORY MEASUREMENT
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SUBSEQUENT MEASUREMENT OF INVENTORY 5 Circumstances arise after purchase or production of inventory that indicate the company will sell inventory for less than cost GAAP requires that companies evaluate their unsold inventory at the end of each reporting period Inventory damage Physical deterioration Obsolescence Changes in price levels Purchase Inventory Reduced ability to sell
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2 APPROACHES TO INVENTORY WRITE-DOWN 6 When the expected benefit of unsold inventory is estimated to have fallen below cost, companies must make an adjusting entry known as an inventory write- down to reduce inventory and net income for the period
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