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1. Inventories: Measurement CHAPTER 8
2. Inventory Those assets that a company:
3. Types of Inventories
4. Inventory Methods
5. Accounting Entries in a Perpetual System
6. Accounting Entries in a Perpetual System
7. Periodic Cost of Goods Sold Equation
8. Accounting Entries in a Periodic System
9. Accounting Entries in a Periodic System
10. Accounting Entries in a Periodic System
11. Comparison of Inventory Systems
12. What is Included in Inventory? General Rule
All goods owned by the company on the inventory date, regardless of their location.
13. Expenditures Included in Inventory
14. Inventory Cost Flow Methods Specific cost identification
Average cost
First-in, first-out (FIFO)
Last-in, first-out (LIFO)
15. Specific Cost Identification Items are added to inventory at cost when they are purchased.
COGS for each sale is based on the specific cost of the item sold.
16. Average Cost Method
17. Weighted-Average Periodic Example
18. Weighted-Average Periodic Example
19. Weighted-Average Periodic Example
20. Weighted-Average Periodic Example
21. Moving-Average Perpetual Example
22. Moving-Average Perpetual Example
23. Moving-Average Perpetual Example
24. Moving-Average Perpetual Example
25. Moving-Average Perpetual Example
26. Moving-Average Perpetual Example
27. First-In, First-Out The cost of the oldest inventory items are charged to COGS when goods are sold.
The cost of the newest inventory items remain in ending inventory.
28. First-In, First-Out Even though the periodic approach and the perpetual approach differ in the timing of adjustments to inventory . . .
. . . COGS and Ending Inventory Cost are the same under both approaches.
29. FIFO - Periodic Example
30. FIFO - Periodic Example
31. FIFO - Periodic Example
32. FIFO - Periodic Example
33. FIFO - Periodic Example
34. FIFO - Perpetual Example
35. FIFO - Perpetual Example
36. FIFO - Perpetual Example
37. Last-In, First-Out
38. Last-In, First-Out The cost of the newest inventory items are charged to COGS when goods are sold.
The cost of the oldest inventory items remain in inventory.
39. Last-In, First-Out Unlike FIFO, using the LIFO method may result in COGS and Ending Inventory Cost that differ under the periodic and perpetual approaches.
40. LIFO - Periodic Example
41. LIFO - Periodic Example
42. LIFO - Periodic Example
43. LIFO - Periodic Example
44. LIFO - Periodic Example
45. LIFO - Perpetual Example
46. LIFO - Perpetual Example
47. LIFO - Perpetual Example
48. LIFO - Perpetual Example
49. LIFO - Perpetual Example
50. When Prices Are Rising . . . LIFO
Matches high (newer) costs with current (higher) sales.
Inventory is valued based on low (older) cost basis.
Results in lower taxable income.
Is not officially endorsed by the IASC. FIFO
Matches low (older) costs with current (higher) sales.
Inventory is valued approximates replacement cost.
Results in higher taxable income.
51. Decision Makers’ Perspective
52. LIFO Liquidation
53. LIFO Inventory Pools
54. Dollar-Value LIFO (DVL)
55. Dollar-Value LIFO (DVL)
56. Dollar-Value LIFO (DVL)
57. Dollar-Value LIFO (DVL)
58. End of Chapter 8
