Chapter%209%20(16th%20Ed).pptm

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ACTG 3110 – Intermediate Accounting I CHAPTER 9 INVENTORIES: ADDITIONAL VALUATION ISSUES
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1. The write-down of inventory A. Lower-of-cost-or-net-realizable-value B. Lower-of-cost-or-market 2. Valuation at net realizable value 3. Relative sales value method 4. Purchase commitments 5. Inventory estimation . Gross Profit Method . Retain Inventory Method (Conventional) CHAPTER OVERVIEW
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If the market price of inventory drops below cost, then inventory is valued on the Balance Sheet at more than current fair value. Conservatism When uncertainly exists, then we should make the choice that is least likely to overstate assets or net income Therefore, in this scenario we write-down the value of inventory NEW METHOD! Analysis to determine amount of write- down includes a comparison of TWO values Original cost Net realizable value Estimated selling price – cost to complete – cost to sell Journal entry options, but the use of “Loss” and “Allowance” accounts are theoretically stronger P9-2 LOWER-OF-COST-OR-NET- REALIZABLE-VALUE (LCNRV)
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