AGENDA

1
AGENDA
1. Items to include in inventory 2. Costs to
include 3. Inventory control systems 4. Cost
flow assumptions
2
ITEMS TO INCLUDE
Goods in Transit - Who owns them?
Ontario border
Toronto
Montreal
July 31 July 31
August 1
FOB - free on board FOB Toronto FOB Ontario
border (or any place) FOB Montreal
3
ITEMS TO INCLUDE
Inventory on consignment Artist Gallery Patron
Who owns the inventory?
4
ITEMS TO INCLUDE

• Special Arrangements
• Parking
• High returns
• Installment sales

5
COSTS TO INCLUDE
Purchase Discounts (210, net 30) Gross
Method Discount is revenue Purchase is recorded
at 100 Net Method Purchase price is 98
6
Inventory Control Systems

• Periodic (like ANK)
• Perpetual
• Modified perpetual

7
Cost Flow Assumptions
FIFO LIFO Average cost (periodic) Weighted
average (perpetual) Specific identification
8
MEETING 9 - AGENDA
Valuation Problems Inventory Errors
9
Valuation Problems

• What is the asset worth?
• LCM
• Gross Profit Method

10
LCM - Decline in Value

• Direct Method
• Allowance Method

11
Gross Profit Method
Opening inventory 100,000 (known)
Purchases 600,000 (known) Available 700,000 -
Cost of goods sold ? Ending
inventory