Chapter 8 - Chapter 8 – Valuation of Inventories...

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Unformatted text preview: Chapter 8 – Valuation of Inventories Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield Copyright Protected Chapter 8-2 1. Identify major classifications of inventory. 2. Distinguish between perpetual and periodic inventory systems. 3. Identify the effects of inventory errors on the financial statements. 4. Understand the items to include as inventory cost. 5. Describe and compare the cost flow assumptions used to account for inventories. 6. Explain the significance and use of a LIFO reserve. 7. Understand the effect of LIFO liquidations. 8. Explain the dollar-value LIFO method. 9. Identify the major advantages and disadvantages of LIFO. 10. Understand why companies select given inventory methods. Learning Objectives Chapter 8-3 Inventory Issues Physical Goods Included in Inventory Costs Included in Inventory Cost Flow Assumptions LIFO: Special Issues Classification Cost flow Control Basic inventory valuation Basis for Selection Goods in transit Consigned goods Special sales agreements Inventory errors Product costs Period costs Purchase discounts Specific identification Average cost FIFO LIFO LIFO reserve LIFO liquidation Dol ar-value LIFO Comparison of LIFO approaches Advantages of LIFO Disadvantages of LIFO Summary of inventory valuation methods Valuation of Inventories: Cost-Basis Approach Chapter 8-4 Inventories are: items held for sale (finished goods), or goods to be used in the production of goods to be sold (raw materials and work in process). Inventory Issues LO 1 Identify major classifications of inventory. Classification Chapter 8-5 Inventory Cost Flow Inventory Issues Il ustration 8-2 LO 1 Identify major classifications of inventory. Chapter 8-6 Inventory Cost Flow Inventory Issues Il ustration 8-3 LO 1 Identify major classifications of inventory. Chapter 8-7 Basic Issues in Inventory Valuation LO 2 Distinguish between perpetual and periodic inventory systems. Valuation Companies must allocate the cost of all the goods available for sale (or use) between the goods that were sold or used and those that are still on hand. Il ustration 8-5 Chapter 8-8 Inventory Control Inventory Issues LO 2 Distinguish between perpetual and periodic inventory systems. All companies need periodic verification of the inventory records by actual count, weight, or measurement, with the counts compared with the detailed inventory records. Companies should take the physical inventory near the end of their fiscal year, to properly report inventory quantities in their annual accounting reports. Chapter 8-9 Basic Issues in Inventory Valuation LO 2 Distinguish between perpetual and periodic inventory systems. The physical goods (goods on hand, goods in transit, consigned goods, special sales agreements)....
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This note was uploaded on 11/10/2011 for the course ACCT 3367 taught by Professor Staff during the Fall '08 term at University of Houston.

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Chapter 8 - Chapter 8 – Valuation of Inventories...

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