Chapter 9

Chapter 9 - 1. 1. Describe and apply the...

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Unformatted text preview: 1. 1. Describe and apply the lower-of-cost-or-market rule. Describe and apply the lower-of-cost-or-market rule. 2. 2. Explain when companies value inventories at net realizable value. Explain when companies value inventories at net realizable value. 3. 3. Explain when companies use the relative sales value method to value inventories. Explain when companies use the relative sales value method to value inventories. 4. 4. Discuss accounting issues related to purchase commitments. Discuss accounting issues related to purchase commitments. 5. 5. Determine ending inventory by applying the gross profit method. Determine ending inventory by applying the gross profit method. 6. 6. Determine ending inventory by applying the retail inventory method. Determine ending inventory by applying the retail inventory method. 7. 7. Explain how to report and analyze inventory. Explain how to report and analyze inventory. Chapter 9 - Chapter 9 - INVENTORIES: INVENTORIES: ADDITIONAL VALUATION ISSUES ADDITIONAL VALUATION ISSUES Chapter 9 - Chapter 9 - INVENTORIES: INVENTORIES: ADDITIONAL VALUATION ISSUES ADDITIONAL VALUATION ISSUES Net realizable Net realizable value value Relative sales Relative sales value value Purchase Purchase commitments commitments Lower-of- Lower-of- Cost-or- Cost-or- Market Market Valuation Valuation Bases Bases Gross Profit Gross Profit Method Method Retail Retail Inventory Inventory Method Method Presentation Presentation and Analysis and Analysis Ceiling and Ceiling and floor floor How LCM How LCM works works Application of Application of LCM LCM Market Market Evaluation of Evaluation of rule rule Gross profit Gross profit percentage percentage Evaluation of Evaluation of method method Concepts Concepts Conventional Conventional method method Special items Special items Evaluation of Evaluation of method method Presentation Presentation Analysis Analysis Inventories: Additional Valuation Issues Inventories: Additional Valuation Issues Inventories: Additional Valuation Issues Inventories: Additional Valuation Issues Market = Replacement Cost Lower of Cost or Replacement Cost Loss should be recorded when loss occurs, not in the period of sale. A company abandons the historical cost principle when the future utility (revenue-producing ability) of the asset drops below its original cost. Lower-of-Cost-or-Market Lower-of-Cost-or-Market Lower-of-Cost-or-Market Lower-of-Cost-or-Market LCM Decline in the RC usually = decline in selling price. RC allows a consistent rate of gross profit....
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Chapter 9 - 1. 1. Describe and apply the...

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