Inventory Acquisition - PowerPoint PPT Presentation

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Inventory Acquisition

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Use same method for book and tax. MBA 301--WINTER 2003. Inventory Valuation ... Chose appropriate market value. Replacement cost...current price to replace ... – PowerPoint PPT presentation

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Title: Inventory Acquisition


1
Inventory Acquisition
  • What units
  • What costs

2
Cost Basis
  • Sacrifice to put into use
  • Components
  • Net price
  • Freight
  • Production
  • Preparation
  • Fees
  • N.B.....future benefit

3
Inventory Methods
  • Perpetual
  • B I - O E
  • Periodic
  • B I - E O

4
Cost Flow Assumption
  • Specific ID
  • Averaging
  • FIFOfirst in first out
  • LIFOlast in first out
  • Applies to costs only, NOT physical movement
  • Disclose both values
  • Use same method for book and tax

5
Inventory Valuation
  • Lower of Cost or Market

6
Lower of Cost or Market
  • Determine historical cost
  • Chose appropriate market value
  • Replacement cost...current price to replace
  • Net realizable valueceiling
  • NRV less normal profitfloor
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