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  • Financial Reporting and Analysis: Inventory Valuation

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    Avinash Kumar
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    This document outlines an inventory valuation session that discusses LIFO and FIFO accounting methods. It presents a case study on Merrimack Tractors and Mowers, Inc. and poses three questions: (1) Prepare a pro-forma income statement for 2008 using LIFO assuming 10,000 unit sales per quarter; (2) Calculate using the same method but with different quarterly sales volumes; (3) Calculate the effects on the financial statements of using FIFO instead, assuming the same steady sales. The document provides an overview of inventory accounting mechanics and issues to consider regarding asset valuation and income taxes when choosing a cost flow method.

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    Session 11 Inventory Valuation

    Original Title

    Session 11 Inventory Valuation

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    This document outlines an inventory valuation session that discusses LIFO and FIFO accounting methods. It presents a case study on Merrimack Tractors and Mowers, Inc. and poses three questions: (1) Prepare a pro-forma income statement for 2008 using LIFO assuming 10,000 unit sales per quarter; (2) Calculate using the same method but with different quarterly sales volumes; (3) Calculate the effects on the financial statements of using FIFO instead, assuming the same steady sales. The document provides an overview of inventory accounting mechanics and issues to consider regarding asset valuation and income taxes when choosing a cost flow method.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    36 views8 pages

    Financial Reporting and Analysis: Inventory Valuation

    Uploaded by

    Avinash Kumar
    This document outlines an inventory valuation session that discusses LIFO and FIFO accounting methods. It presents a case study on Merrimack Tractors and Mowers, Inc. and poses three questions: (1) Prepare a pro-forma income statement for 2008 using LIFO assuming 10,000 unit sales per quarter; (2) Calculate using the same method but with different quarterly sales volumes; (3) Calculate the effects on the financial statements of using FIFO instead, assuming the same steady sales. The document provides an overview of inventory accounting mechanics and issues to consider regarding asset valuation and income taxes when choosing a cost flow method.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as pptx, pdf, or txt
    of 8

    FINANCIAL REPORTING AND

    ANALYSIS
    Inventory Valuation
    Session 11
    Financial Reporting and Analysis
    Financial
    Statements
    Income
    Statement
    (Session
    3 & 4)
    Balance
    Sheet
    (Sessio
    n 2)
    Financial
    Statements-
    integrated
    exercise
    ( session 9)
    Cash flow
    Statement
    (Session 7
    & 8)
    Accounting
    The
    Mechanics
    of financial
    Accounting
    (Session 5
    & 6)
    1. Revenue
    Recognition
    (Session 10)
    2. Accounting for
    - Inventory (Session
    (Session 11)
    - Long Lived Assets
    (Session 12)
    - Liability and Equity
    Financing (Session 13)
    - Off Balance sheet
    items (Session 14)
    - Income Tax (Session
    15)
    - Consolidated
    Financial Statements
    (Session 16)
    Financial
    Analysis
    - Annual
    Report
    (Session 17)
    - Financial
    Statement
    Analysis
    (Session 18 &
    19)
    Merrimack Tractors and Mowers, Inc:
    LIFO or FIFO?
    What is the situation here?
    Asset
    Valuation
    Income
    Taxes
    Cost flow
    Physical flows
    Merrimack Tractors
    Perpetual system
    Periodic inventory system
    - FIFO
    - LIFO
    - Average cost
    Q 1
    Using LIFO, prepare a pro-foma income
    statement for 2008 assuming that the
    company sells 10,000 units each quarter at a
    price of $2000 per unit
    With Sales General and Administration costs
    the same as for 2007
    Q 2
    What if the Unit sales pattern was 10000,
    5000, 20000, 5000 in the four quarters?
    Q 3
    Assuming 10000 units of sales per quarter,
    what are the effects of using FIFO on the
    financial statement?

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