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510chapter8fall2009afterclass1232009

510chapter8fall2009afterclass1232009 - Chapter 8 Valuation...

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Chapter 8: Valuation of Inventories: A Cost Basis Approach    
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What’s Important Inventory classification and control Physical goods included in inventory Cost flow assumptions LIFO reserve LIFO liquidation Dollar value LIFO
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What’s not on the exam Special sales agreements Effect of inventory errors Costs included in inventory
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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
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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
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Changes in a pool are measured in terms of total dollar value, not physical quantity.
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