Unformatted text preview: i Purchase
Jan 1 29 I 20 400 ‘ 5 I _ , $17T
Maij 55I 30 1,650 l 11. LOWER OF COST OR MARKET RULE > The business must write down the value of its good if the replacement cost (
market value) of inventory falls below its historical cost. > E.g:
Suppose a business paid RM3,000 for inventory on September 26. by December 31, its value has fallen. The inventory can now be replaced for RM2,200. Market value is below cost and the Dec 31, balance sheet report this inventory at its LCM
value of RM2,200. V Balance Sheet
Inventories, at market 2,200 12: ESTIMATING INVENTORY > Business must estimate the value of its inventory, > Applied by few companies which are not use the perpetual inventory system and
cannot determine ending inventory by looking at the Inventory Account.
> Method for estimating ending inventory is the gross margin method The Gross Margin! (Profit) Method
- Based on the cost- of— goods— sold — model Beginning inventory (+) Net Purchase Cost of goads available for sale
(—) Ending inventory COGS |><I><><l><>< - Rearrange the model to estimating ending inventory >< Beginning inventory
(+) Net purchase l>< 25 rim ll ...
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- Summer '19