Business Administration 2257 Chapter Notes - Chapter 6.2: Write-Off, Financial Statement, Current Asset

• School: Western University
• Department: Business Administration
• Course: Business Administration 2257
• Professor: J S

Document Summary

Important to show inventory appropriately because the merchandise inventory account is usually the largest current asset: cogs will likely be the largest expense account. The reported (cid:374)u(cid:373)(cid:271)ers are used to a(cid:374)alyze a (cid:272)o(cid:373)pa(cid:374)y"s effe(cid:272)ti(cid:448)e(cid:374)ess i(cid:374) (cid:373)a(cid:374)agi(cid:374)g its inventory. Valuing inventory at the lower of cost and net realizable value. When the net realizable value of inventory is lower than its cost, inventory is written down to its net realizable value: called lower of cost and net realizable value. Most companies will now disclose the cost and net realizable value of their inventories separately. Appendix 61 inventory cost determination methods in periodic system. Using the periodic method, you make the adjustments to inventory at the end of the period assuming the entire pool of costs is available for allocation. Once we know the number of units in the ending balance, we assume it is composed of our most recent purchase.