6

Inventories

Learning Goals

Identify the types of inventory used by merchandisers

and manufacturers.

Summarize and provide examples of control procedures

that apply to inventories.

Describe three inventory cost flow assumptions and how

they impact the income statement and balance sheet.

Determine the cost of inventory under the perpetual in-

ventory system, using the first-in, first-out; last-in, first-out;

and average cost methods.

Determine the cost of inventory under the periodic

inventory system, using the first-in, first-out; last-in,

first-out; and average cost methods.

Compare and contrast the use of the three inventory

costing methods.

Determine the proper valuation of inventory at other than

cost, using the lower-of-cost-or-market and net realizable

value concepts.

Describe how inventories are being reduced through

quick response.

Determine and interpret the inventory turnover ratio and

the number of days’ sales in inventory.

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