{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

510chapter9fall2009bb - C ha pter Addi ti ona l Addi 9 I...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 9: I nventories: Chapter 9: I nventories: Additional Valuation Issues Additional Valuation Issues
Background image of page 1

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

View Full Document Right Arrow Icon
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 Market Lower of Cost or Market
Background image of page 2
The lower of cost or market rule : 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 Market: Lower of Cost or Market: Ceiling and Floor Ceiling and Floor
Background image of page 3

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

View Full Document Right Arrow Icon
Inventory Valuation—Lower of Inventory Valuation—Lower of Cost or Market Cost or Market What is the rationale for the What is the rationale for the Ceiling Ceiling and and Floor Floor limitations? limitations?
Background image of page 4
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.
Background image of page 5

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

View Full Document Right Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}