Learning Objectives 1.Describe and apply the lower-of-cost-or-net realizable value rule. 2.Explain when companies value inventories at net realizable value. 3.Explain when companies use the relative sales value method to value inventories. 4.Discuss accounting issues related to purchase commitments. 5.Determine ending inventory by applying the gross profit method. 6.Determine ending inventory by applying the retail inventory method. 7.Explain how to report and analyze inventory.
Inventories: Additional Valuation Issues Net realizable value Relative sales value Purchase commitments Lower-of-Cost-or-Market Valuation Bases Gross Profit Method Retail Inventory Method Presentation and Analysis Ceiling and floor How LCM works Application of LCM “Market”Use of an allowance Multiple periods Evaluation of rule Gross profit percentage Evaluation of method Concepts Conventional method Special items Evaluation of method Presentation Analysis
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