Inventory Flashcards
periodic inventory system
determines an inventory count at a specific point in time
With the periodic approach, sales are recorded only AFTER all the purchases for a period are recorded.
perpetual
while a perpetual system tracks inventory on an ongoing basis.
retail method
retail method uses current cost of goods sold and revenue to determine an estimate of inventory
gross profit method
while the gross profit method uses current cost of goods sold and gross profit to determine an estimate of inventory.
LCM
lower of cost or market:
- original cost
- replacement cost
- NRV = selling price - disposal
- FLOOR = NRV - profit
choose number in middle between 2/3/4.
then compare that number to original cost.
which one is lower, use it.
IFRS LCNRV
lower of cost or NRV
IFRS only compares cost and NRV (selling price - disposal)
disposal cost
- cost to complete
- freight out
- sales commission
not an acceptable method under IFRS
LIFO
items held in consignment
excluded from PHYSICAL count of ending inventory
inventory turnover ratio is calculated
by dividing Cost of Goods Sold by Average Inventory.
double declining balance
cost * (1/yrs) *2 = depreciation expense
ignore salvage
sum of years digits
(cost - salvage) * (# of years left/(N*(N+1)/2)))
numerator = # of year left denominator = N(N+1)/2
interest capitalized
would be equal to the avoidable interest
intangible asset of finite duration
must be amortized over the shorter of its legal or useful life.
FIFO inventory is valued at
Lower of cost or NRV
