510chapter9fall2009bb

510chapter9fall2009bb - Chapter 9: I nventor ies: Chapter...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 9: I nventor ies: Chapter 9: I nventor ies: Additional Valuation I ssues Additional Valuation I ssues The lower of cost or market is an exception to the historical cost principle. When the future potential of the asset is less than its original cost: Restate asset at market to replace cost. The loss must be charged against revenues of the period. Lower of Cost or Mar ket Lower of Cost or Mar ket The lower of cost or mar ket r ule : 1. Market value is the replacement cost . 2. The replacement cost must lie between a ceiling amount and a floor amount. 3. The ceiling is the net realizable value (selling price less disposal cost). 4. The floor is net realizable value less a normal profit margin . Lower of Cost or Mar ket: Lower of Cost or Mar ket: Ceiling and Floor Ceiling and Floor I nventor y ValuationLower of I nventor y ValuationLower of Cost or Mar ket Cost or Mar ket What is the rationale for the What is the rationale for the Ceiling Ceiling and and Floor Floor limitations? limitations? Ceiling prevents overstatement of the value of obsolete, damaged, or shopworn inventories. Floor deters understatement of inventory and overstatement of the loss in the current period. Lower-of-Cost-or-Market Rationale for Limitations Lower-of-Cost-or-Market Lower-of-Cost-or-Market How LCM Works (Individual Items) Illustration 9-5 Illustration 9-5 Lower-of-Cost-or-Market Lower-of-Cost-or-Market Methods of Applying LCM Illustration 9-6 Illustration 9-6 Lower-of-Cost-or-Market...
View Full Document

Page1 / 19

510chapter9fall2009bb - Chapter 9: I nventor ies: Chapter...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online