What We Learn - PowerPoint PPT Presentation

Loading...

PPT – What We Learn PowerPoint presentation | free to download - id: 2638d1-ZDc1Z



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

What We Learn

Description:

What We Learn. T-account for Inventory. Valuation Criteria. Inventory ... sheet, and report unrealized loss, but ask: where the unrealized loss is placed? ... – PowerPoint PPT presentation

Number of Views:19
Avg rating:3.0/5.0
Slides: 9
Provided by: bixi
Learn more at: http://info.wlu.ca
Category:
Tags: learn | unrealized

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: What We Learn


1
What We Learn
  • T-account for Inventory
  • Valuation Criteria
  • Inventory System
  • Cost Flow Assumptions
  • Inventory Estimation
  • More financial statement analysis

2
T Account
  • Beginning
  • New purchase
  • COGS
  • Ending Inventory

3
Inventory Valuation
  • Is inventory an asset?
  • two types of uncertainties can you sell?
    Obsolescence?
  • Valuation Criteria
  • Historical cost
  • market value replacement cost (
    purchasing costs ) or net
  • realizable cost ( selling price
    selling cost)
  • Canadian practice Lower of cost and
    market

4
Inventory Values
  • Acquisition costs invoice price any costs
    related to inventory purchase except for
    transportation in ( shipping costs) and cartage
    costs
  • Shipping costs and cartage costs are added into
    inventory costs as period costs, i.e.
  • beginning purchase shipping cartageending
    COGS
  • Lower of cost and market ( net realizable cost is
    used)
  • direct method show lower of cost and
    market on balance sheet and report unrealized
    loss, but ask where the unrealized loss is
    placed?
  • Allowance method using contra account
    (Loss due to market decline of inventory), show
    both inventory and contra accounts on balance
    sheet, and report unrealized loss, but ask where
    the unrealized loss is placed?

5
Inventory Systems
  • Perpetual inventory system record inventory
    reduction at the time of sale two journal
    entries
  • Periodic inventory system no record inventory
    reduction at the time of sale one journal entry
  • Benefit-cost trade-off cost? current
    information? Inventory shrinkage?

6
Cost Flow Assumptions
  • Inventory record for individual inventory units
    specific identification
  • Pooled inventory cost flow assumptions
  • FIFO first in, first out
  • LIFO last in, first out
  • Weighted average average cost for both COGS
    and ending inventory
  • Differences among cost flow assumptions
  • if no inflation or deflation, three
    assumptions yield the same numbers.
  • During the period of inflation or deflation,
    the difference depends on the change in price,
    size of inventory and inventory turnover.

7
Inventory Estimation
  • Cost to sales ratio COGS /sales
  • can be applied with periodic system
  • can be used in planning

8
Financial Statement Analysis
  • Inventory turnover COGS/average inventory
  • Interpretation the higher the better
About PowerShow.com