INVENTORIES – measured @ LCNRV

 if Cost > NRV, inventory writedown

 if NRV > Cost, not recognized

Methods for Inventory Writedown

1.Direct method/COGS method kung ilan ang bilang un ang irerecord.
2.Allowance method/Loss Recorded at cost then set up allowance
method

Freight Collect Freight Prepaid

Handle Paid Handle Paid
FOB Shipping Point Buyer Buyer Buyer Seller
FOB Destination Seller Buyer Seller Seller
 Trading Manufacturing
Inventory beg. xxx RM beg. xxx
Purchases xxx Purchases xxx
TGAS xxx RM avail for use xxx
Inventory end (xxx) RM end (xxx)
COGS xxx RM used xxx
WIP beg. xxx
DL xxx
OH xxx
Total manufacturing cost xxx
WIP end (xxx)
COGMAN xxx
FG beg. xxx
TGAS xxx
FG end (xxx)
COGS xxx
 Periodic Perpetual
Buy Purchases xxx Merchandise inventory xxx
A/P xxx A/P xxx
Sell A/R xxx A/R xxx
Sales xxx Sales xxx
COGS xxx
Merchandise inventory xxx
Year Merchandise inventory xxx None
end Income summary xxx
Inventory short/over Adjustment
Inventory short xxx Normal
Merchandise inventory xxx COGS xxx
Inv short xxx
Abnormal
Expense xxx
Inv short xxx
Estimation of inventory

based on
1.Gross sale Sales xxx
kung alin ang
profit COGS (xxx)
base un ang Profit xxx
method based on
cost
100%
Determining
gross profit rate if silent:
1. Look for possible trend.
2. if the problem states “average gross profit”,
GPR yr 1+GPR yr 2…
GPR=
no . of years

3. if the problem states “overall gross profit ratio”

GPR=
GPR yr 1+ GPR yr 2…
Sales yr 1+ Sales yr 2…

2. Retail inventory method

Methods to compute cost ratio Beg. Inventory Markup Markdown
 1.Conservative/conventional/LCNR Included Included Excluded
V
2.Average Included Included Included
3.FIFO Excluded Included included
TGAS @ cost
Cost ratio=
TGAS @retail
TGAS xxx
Less: Sales-sales return only (xxx)
Inv end @retail xxx
Multiply: cost ratio xxx
Inv end @cost xxx

 Average approach ang pinapayagan ng PAS.

 Purchase Return lang ang deducted sa retail.
 Sales allowances & sales discount are not deducted sa sales.
 Maintained markup “markon”-price after all adjustments