ECSTASY
Pangkaj Kumer Saha 08-10369-1 Ushnish Ahmed 08-10354-1 Mir Shabbir Hossain 08-10397-1 M. Hasib Uddin 08-10116-1
INVENTORY VALUATION
Valuation of inventory
What is a inventory
Inventory classification
Physical goods
WHAT IS A INVENTORY?
Assets which are intended for sale It is a important barometer of business. It affect both the balance sheet and income statement.
INVENTORY CLASSIFICATION
PHYSICAL GOODS
Counting, weighing, or measuring each kind of inventory on hand involves physical inventory count.
GOODS IN TRANSIT
FIFO
The earliest goods purchased are first to be sold. Actual flow of merchandise often parallels by FIFO. Cost of the earliest goods purchased are the first to be recognized as Cost of Goods Sold.
Step 1 Ending Inventory Unit Total Date Units Cost Cost 11/27 400 $ 13 $ 5,200 08/24 50 12 600 450
Cost of goods available for sale Less: Ending inventory Cost of goods sold
$ 12,000 5,800
LIFO
The latest goods purchased are the first to be sold under LIFO method. Actual physical flow seldom coincides with by LIFO. Costs of latest goods purchased are the first to be cost of goods sold under LIFO.
Step 1 Ending Inventory Unit Total Date Units Cost Cost 01/01 100 $ 10 $ 1,000 04/15 200 11 2,200 08/24 150 12 1,800 450
Cost of goods available for sale Less: Ending inventory Cost of goods sold
$ 12,000 5,000
AVERAGE METHOD
The average cost method assumes that the goods available for sale have the same cost per unit. (average) Cost of Goods available for sale allocated
on the basis of weighted average unit cost under average method.
The weighted average unit cost is then applied to the units on hand.
Step 1 Ending Inventory $ 12,000 1,000 = $12.00 Unit Total Units Cost Cost 450 x $ 12.00 =
Step 2 Cost of Goods Sold Cost of goods available for sale Less: Ending inventory Cost of goods sold $ 12,000 5,400
Minimizes taxes in
Easy to manipulate
QUESTION-ANSWER SESSION