ACCT 3001 Lecture : Course Notes Ch9
Document Summary
Chapter 9 inventories: part ii: lower of cost or market, other valuation bases, gross profit method, presentation and analysis, ifrs insights. Note: retail inventory method (pages 508-514) is omitted: lower of cost or market (lcm) Rationale for limits: ceiling prevents overstatement of the value of obsolete, damaged, or shopworn inventories, floor deters understatement of inventory and overstatement of the loss in the current period. Class example lower of cost or market. The following data is available about the items in inventory as of december 31, 2011. Evaluation of lcm rule deficiencies: expense recorded when loss in utility occurs. ,500 recognized at the point of sale. - lack of matching: inventory valued at cost in one year and at market in the next year - inconsistent, net income in year of loss is lower. Should be stated at lcm--- to be conservative: other valuation bases (lcm is true norm, net realizable value special situations.
