Learning outcomes

The learning outcome statements related to inventories are as follows:

1. Identify issues in inventory valuation, including which goods to include, what costs to include, and which cost assumption to use
2. Identify and compare cost flow assumptions used in accounting for inventories
3. Demonstrate an understanding of the lower of cost or market rule for LIFO and the retail inventory method, and the lower of cost and net realizable value rule for all other inventory methods
4. Calculate the effect on income and on assets of using different inventory methods
5. Analyze the effects of inventory errors
6. Identify advantages and disadvantages of the different inventory methods
7. Recommend the inventory method and cost flow assumption that should be used for a company given a set of facts

The chapters that follow cover these in order: which goods and costs to include (ownership and capitalization), cost flow assumptions and inventory systems, LCM/LCNRV valuation, and inventory errors.