文档介绍：Investment Tools:Financial Statement Analysis Assets
九 Investment Tools: Financial Statement Analysis: Assets
13>.A: Analysis of Inventories
a: Compute ending inventory balances and cost of goods sold using the LIFO, FIFO, and average cost methods to account for product inventory.
Example: Given the following inventory data:
January 1 (beginning inventory):
2 units @ $2 per unit = $ 4
January 7 purchase:
3 units @ $3 per unit = $9
January 19 purchase:
5 units @ $5 per unit = $25
Cost of goods available (BI + P):
10 units = $38
Units sold during January:
7 units
FIFO cost of goods sold (value the 7 units sold at unit cost of last units purchased). Start at the top and work down:
From beginning inventory:
2 units @ $2 per unit = $4
From first purchase:
3 units @ $3 per unit = $ 9
From second purchase:
2 units @ $5 per unit = $10
FIFO cost of goods sold:
7 units = $23
Ending inventory:
3 units @ $5 = $15
LIFO cost of goods sold (value the 7 units sold at unit cost of first units purchased). Start at the bottom and work up:
From second purchase:
5 units @ $5 per unit = $25
From first purchase:
2 units @ $3 per unit = $6
LIFO cost of goods sold:
7 units = $31
Ending inventory:
2 @ $2 + 1 @ $3 = $7
Average cost of goods sold (value the 7 units sold at the average unit cost of goods available).
Average unit cost = $38 / 10 = $ per unit
Weighted average cost of goods sold = 7 @ $ = $
Ending inventory = 3 @ $ = $
b: Explain the usefulness of inventory and cost-of-goods-sold data provided by the LIFO, FIFO, and average cost methods when prices are 1) stable, or 2) rising.
Balance sheet: Inventories based on FIFO are preferable since these values most closely resemble current cost and hence current economic value. GAAP requires that firms use the lower of cost or market when valuing inventory. Applying the lower-of-cost-or-market to the inventory calculated under any cost fl