510chapter8fall2009afterclass1232009

510chapter8fall2009afterclass1232009 - Chapter 8: Valuation...

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Unformatted text preview: Chapter 8: Valuation of Inventories: A Cost Basis Approach Whats Important Inventory classification and control Physical goods included in inventory Cost flow assumptions LIFO reserve LIFO liquidation Dollar value LIFO Whats not on the exam Special sales agreements Effect of inventory errors Costs included in inventory When older, low cost inventory is sold results in a lower cost of goods sold, higher net income, and higher taxes. Special Issues Related to LIFO LIFO Liquidation Illustration 8-20 Illustration 8-20 Use the specific goods pooled LIFO approach: a pool is a combination of similar items. reductions in one item, compensated by increases in other items. Use dollar-value LIFO where: changes in pools are determined in terms of dollars, not quantities. Methods to Alleviate Layer Liquidation Problems Changes in a pool are measured in terms of total dollar value, not physical quantity. Advantage: Broader range of goods in pool. Permits replacement of goods that are similar....
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This note was uploaded on 12/29/2009 for the course ACC 5100 taught by Professor Andrews during the Fall '09 term at Wayne State University.

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510chapter8fall2009afterclass1232009 - Chapter 8: Valuation...

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