CHAPTER 5

INVENTORIES AND
COST OF GOODS SOLD

1
 Inventory Definition
Inventory
Inventory

Goods
Goods owned
owned Current
Current
and
and held
held for
for sale
sale asset
asset
to
to customers
customers
•Inventory is non-financial asset and usually is shown in the balance sheet at its cost
•As items are sold from inventory, their costs are removed from the balance sheet
and transferred to the cost of goods sold which is offset against sales revenue.

2
The Flow of Inventory Costs
 There are two systems of inventory cost flow
 Physical inventory system and
 Perpetual inventory systems

3
 PERIODIC VS. PERPETUAL
INVENTORY SYSTEM

1. Periodic inventory system:- under this system, no

detailed record of inventory is being maintained
during the year. An actual physical count of the
goods remaining on hand is required at the end of
each period.
2. Perpetual inventory system:- this system involves
the maintenance of detailed inventory records in
the accounting system. Continuous record is
maintained on a transaction-by-transaction basis
throughout the period.

4
 RECODING OUTLINE(PERIODIC)

 Record all purchases- During the period the

purchase cost of all goods bought is accumulated in
an account called Purchases.
 Record all sales- During the period, the sales price
for all goods sold is accumulated in a sales
Revenue account
 Count the number of units on hand- At the end of
the period, the Inventory account Balance still
reflects the inventory amount carried over from the
prior period since no entries are made to the
inventory accounting during the current period.

5
In a periodic inventory system, inventory entries
are as follows.

Note
Note that
that an
an entry
entry is
is not
not
made
made to to inventory.
inventory.
6
 RECORDING OUTLINE (PERPETUAL)

 Record all purchases- During the period, the

purchase cost of each type of goods bought is
entered in the Inventory ledger account as an
increase and in a detailed perpetual inventory
record.
 Record all Sale- During the period, each sales is
recorded by means of two companion entries.
 One entry is to record the sales revenue at sales price and
 The other entry is to record the cost of goods sold at
purchase cost

7
 Perpetual inventory system
In a perpetual inventory system, inventory entries are parallel to the flow of
costs.
GENERAL JOURNAL
Date Account Titles and Explanation P Debit Credit
Entry on Purchase Date
Inventory $$$$
Cash/Accounts Payable $$$$

Entry on Sale Date

Cost of Goods Sold $$$$
Inventory $$$$

Cash/Accounts Receivable $$$$

Sales $$$$

8
 Record all Returns- During the period,
Purchase returns and sales returns are
recorded in the inventory account and on the
perpetual inventory record at cost
 Use Cost of Goods Sold and Inventory
Amounts- At the end of the period, the
balance in the Cost of Goods Sold accounts
provides the total amount of expense that is
reported on the income statement and the
amount of inventory that is reported in the
balance sheet.

9
PERPETUAL INVENTORY RECORD
Item X
Location Store No. 1, Shelf 4
Date Explanation Qty Unit co Qty Cost Bal. on Total
purchased Cost st sold hand cost
Jan.1 Beg. 200 8 1600
Inventory
Jan 31 Sold 5 3 600
Feb 5 Purchase 10 200 2000 13 2600
Mar 6 Return (1) (200) 14 2800
sales

Total Purchase: 10 2000

4 800
12 2400

10
DIFFERENCES BETWEEN PERIODIC AND PERPETUAL

 Inventory Under:-
 Periodic :- During the period, the inventory account
is not changed, thus, it reflects the beginning
inventory amount.
 During the period each purchase is recorded in the
purchase account. As a consequence, the ending inventory
each period must be measured by physical count, and then
multiple at unit cost
 Perpetual:- During the period, the Inventory account
is increases for each purchase and decrease (at
cost) for each sale. Thus, at the end of the period, it
shows ending inventory amount
11
Cost of Goods sold: Under
A. Periodic:- During the period, no entry is
made for cost of goods sold. At the end of
the period, after the physical inventory
count, cost of goods sold is measured as:
 Beg. Inv. + Purchases – End. Inv. = CGS

B. Perpetual:- During the period, cost of goods

sold is recorded at the time of each sale and
the Inventory account is reduced (at cost).
Thus, the system measure the cost of
goods sold amount for the period.

12
Advantages of Perpetual Inventory over
Periodic Inventory:
 It provides continuous inventory amounts
 It provides the cost of goods sold amount without
the necessity of taking a periodic inventory count.
 It provides continuing information necessary to
maintain minimum and maximum inventory levels by
appropriate timing of purchase
 It provides a basis for measuring the amount of the
theft.
 It provides cost of goods sold information needed to
record sales at both selling price and cost.

13
Which Unit Did We Sell?
• When identical units of inventory have different unit costs, a
question naturally arises as to which of these costs should be
used in recording a sale of inventory.

• To identify the cost of the unit sold we may use different

inventory valuation method.

14
 Inventory Valuation Methods
We may use one of these inventory valuation
methods to determine cost of inventory sold.

1. Specific Identification
2. Average cost
3. FIFO
4. LIFO

15
 Perpetual Inventory system
• We may use one of the inventory valuation
methods to determine cost of inventory sold.

1. Specific Identification
2. Average cost
3. FIFO
4. LIFO

16
Data for an Illustration
The Bike Company (TBC)

17
1. Specific Identification
When
When aa unit
unit is
is sold,
sold, its
its specific
specific cost
cost is
is
added
added to
to cost
cost of
of goods
goods sold.
sold.

On
On August
August 14,
14, TBC
TBC sold
sold 20
20 bikes
bikes for
for $130
$130 each.
each.
Of
Of the
the bikes
bikes sold
sold 99 originally
originally cost
cost $91
$91 and
and 11
11 cost
cost
$106.
$106.
18
 Specific Identification

The
The Cost
Cost ofof Goods
Goods Sold
Sold for
for the
the August
August 14 14 sale
sale is
is
$1,985,
$1,985, leaving
leaving $515
$515 and
and 55 units
units in
in inventory.
inventory.

Let’s look at the entries for the Aug. 14 sale.

19
Specific Identification

Retail
Retail (20
(20 ×× $130)
$130)

Cost
Cost

A
A similar
similar entry
entry is
is made
made after
after each
each sale.
sale.
20
 Specific Identification

Cost
Cost of
of Goods
Goods
Sold
Sold for
for
August
August 3131 ==
$2,610
$2,610

Additional
Additionalpurchases
purchaseswere
weremade
madeon
onAugust
August17
17and
and28.
28.
Costs
Costsassociated
associatedwith
withsales
saleson
onAugust
August31
31were
wereas
asfollows:
follows:11@
@$91,
$91,
33@@$106,
$106,15
15@
@$115,
$115,&&44@
@$119.
$119.

21
 Specific Identification

Income Statement
COGS = $4,595

Balance Sheet
Inventory = $1,395 11 @@ $$ 106
106 == $$ 106
106
55 @@ $$ 115
115 == 575
575
66 @@ $$ 119
119 == 714
714
End.
End. Inv.
Inv. $$1,395
1,395 22
2. Average-Cost Method
 When the average cost method is in use, the average
cost of all units in inventory is computed after every
purchases
 When a unit is sold, the average cost of each unit in
inventory is assigned to cost of goods sold.
 Average cost computed by dividing the total cost of
goods available for sale by the number of units in
inventory

Cost of Goods Units on hand on

Available for Sale ÷ the date of sale

23
 Average-Cost Method

The
Theaverage
averagecost
cost per
perunit
unit
must
must be
becomputed
computedprior
prior
to
toeach
eachsale.
sale. $2,500  25
$2,500 25 == $100
$100

On
On August
August 14,
14, TBC
TBC sold
sold 20
20 bikes
bikes for
for $130
$130 each.
each.

24
 Average-Cost Method

The
The average
average costcost per
per
unit
unit is
is $100.
$100. $100 $2,500  25
$100 == $2,500 25

The entries for the Aug. 14 sale is

25
Average-Cost Method

Retail
Retail

Cost
Cost

A
A similar
similar entry
entry is
is made
made after
after each
each sale.
sale.

26
Average-Cost Method

Additional
Additional purchases
purchases were
were made
made on
on August
August 17
17
and
and August
August 28.
28.
On
On August
August 31,
31, an
an additional
additional 23
23 units
units were
were sold.
sold.

27
Average-Cost Method

$114 $3,990  35
$114 == $3,990 35

28
Average-Cost Method

The
The average
average cost
cost per
per $114 $3,990  35
$114 == $3,990 35
unit
unit is
is $114.
$114.

29
Average-Cost Method

Income Statement
COGS = $4,622

Balance Sheet
Inventory = $1,368 $114
$114 ×× 12
12 == $1,368
$1,368
30
3. First-In, First-Out Method (FIFO)
FIFI is based on the assumption that the first merchandise
purchased is the first merchandise sold
In FIFO method is that in the balance sheet inventory is
Valued at recent purchase cost

Oldest
Oldest Costs
Costs of
of
Costs
Costs Goods
Goods Sold
Sold

Recent
Recent Ending
Ending
Costs
Costs Inventory
Inventory
31
First-In, First-Out Method (FIFO)

The
The Cost
Cost of
of Goods
Goods Sold
Sold for
for the
the August
August 14 14 sale
sale is
is $1,970,
$1,970,
leaving
leaving $530
$530 and
and 55 units
units in
in inventory.
inventory.

On
On August
August 14,
14, TBC
TBC sold
sold 20
20 bikes
bikes for
for $130
$130 each.
each.

32
First-In, First-Out Method (FIFO)

Retail
Retail

Cost
Cost

A
A similar
similar entry
entry is
is made
made after
after each
each sale.
sale.
33
First-In, First-Out Method (FIFO)

Additional
Additionalpurchases
purchaseswere
weremade
madeon onAug.
Aug.17
17and
andAug.
Aug.28.
28.
Cost
Cost of
of
On Goods
Goods
August Sold
31, Sold
an for
for August
August
additional 23 units 31
31
were == $2,600
$2,600
sold.
On August 31, an additional 23 units were sold.

34
First-In, First-Out Method (FIFO)

Income Statement
COGS = $4,570

Balance Sheet
22 @
@ $$115
115 == $$ 230
230
10
10 @@ $$119
119 == 1,190
1,190
Inventory = $1,420
End.
End. Inv.
Inv. $$1,420
1,420
35
 4. Last-In, First-Out Method (LIFO)
LIFO assume that the most recently purchased merchandise
(the last in) is to be sold first.
By LIFO methods the cost assigned to the cost of goods sold
are relatively current because they reflect the most recent
purchase
That leaves the older costs to be used to value ending inventory

Recent
Recent Costs
Costs of
of
Costs
Costs Goods
Goods Sold
Sold

Oldest
Oldest Ending
Ending
Costs
Costs Inventory
Inventory 36
Last-In, First-Out Method (LIFO)

The
The Cost
Cost ofof Goods
Goods Sold
Sold for
for the
the August
August 14 14 sale
sale is
is
$2,045,
$2,045, leaving
leaving $455
$455 and
and 55 units
units in
in inventory.
inventory.
On
On August
August 14,
14, TBC
TBC sold
sold 20
20 bikes
bikes for
for $130
$130 each.
each.

37
Last-In, First-Out Method (LIFO)

Retail
Retail

Cost
Cost

A similar entry is made after each sale.

38
Last-In, First-Out Method (LIFO)

Additional
Additional purchases
purchases were
were made
made on
on Aug.
Aug. 17
17 and
and Aug.
Aug. 28.
28.
On
On Aug.
Aug. 31,
31, an
an additional
additional 23
23 units
units were
were sold.
sold.

39
Last-In, First-Out Method (LIFO)

Cost
Cost of
of Goods
Goods Sold
Sold for
for August
August 31
31 == $2,685
$2,685

40
Last-In, First-Out Method (LIFO)

Income Statement
COGS = $4,730

Balance Sheet 55 @
@ $$ 9191 == $$ 455
455
Inventory = $1,260 77 @
@ $$115
115 == 805
805
End.
End. Inv.
Inv. $$1,260
1,260
41
 Inventory Valuation Methods: A Summary
Costs Allocated to:
Valuation Cost of Goods
Method Sold Inventory Comments
Specific Actual cost of Actual cost of units Parallels physical flow
identification the units sold remaining Logical method when units
are unique
May be misleading for
identical units
Average cost Number of units Number of units on Assigns all units the same
sold times the hand times the average unit cost
average unit cost average unit cost Current costs are averaged
in with older costs
First-in, First-out Cost of earliest Cost of most Cost of goods sold is based
(FIFO) purchases on recently on older costs
hand prior to the purchased units Inventory valued at current
sale costs
May overstate income during
periods of rising prices; may
increase income taxes due
Last-in, First-out Cost of most Cost of earliest Cost of goods sold shown at
(LIFO) recently purchases recent prices
purchased units (assumed still in Inventory shown at old (and
inventory) perhaps out of date) costs
Most conservative method
during periods of rising
prices; often results in lower
42
income taxes
 Periodic Inventory Systems
We can use one of these inventory valuation
methods in a periodic inventory system too.

Specific Average
identification cost

FIFO LIFO
43
Examples
Computers, Inc.
Mouse Pad Inventory
Date Units $/Unit Total
Beginning
Inventory 1,000 $ 5.25 $ 5,250.00
Purchases:
Jan. 3 300 5.30 1,590.00
June 20 150 5.60 840.00
Sept. 15 200 5.80 1,160.00
Nov. 29 150 5.90 885.00
Goods
Available
for Sale 1,800 $ 9,725.00
Ending
Inventory 1,200 ?
Cost of
Goods Sold 600 ?
44
 Specific Identification
By reviewing actual purchase invoices, Computers,
plc. determines that the 1,200 mouse pads on hand
at year-end have an actual total cost of $6,400.
Determine the cost of goods sold for the year.

45
Specific Identification
Computers, Inc.
Mouse Pad Inventory
Date Units $/Unit Total
Beginning
Inventory 1,000 $ 5.25 $ 5,250.00
Purchases:
Jan. 3 300 5.30 1,590.00
June 20 150 5.60 840.00
Cost
Sept.
Cost of
15
of Goods
Goods Sold
200
Sold 5.80 1,160.00
Nov. 29 150 5.90 885.00
$9,725
$9,725 --
Goods $6,400
$6,400 == $3,325
$3,325
Available
for Sale 1,800 $ 9,725.00
Ending
Inventory 1,200 $ 6,400.00
Cost of
Goods Sold 600 $ 3,325.00
46
Average-Cost Method

The
The average
average cost
cost is
is calculated
calculated at
at year-end
year-end
as
as follows:
follows:

Total Number of
Total Cost of Goods
Available for Sale
÷ Units Available for
Sale

47
 Average-Cost Method
Computers, Inc.
Mouse Pad Inventory
Avg.
Avg.Cost $9,7251,800
Cost $9,725 1,800== Date Units $/Unit Total
$5.40278
$5.40278 Beginning
Ending
EndingInventory
Inventory Inventory 1,000 $ 5.25 $ 5,250.00
Avg.
Avg.Cost $5.402781,200
Cost $5.40278 1,200== Purchases:
$6,483
$6,483 Jan. 3 300 5.30 1,590.00
June 20 150 5.60 840.00
Cost
Costof
ofGoods
GoodsSold
Sold Sept. 15 200 5.80 1,160.00
Avg.
Avg.Cost $5.40278600
Cost $5.40278 600== Nov. 29 150 5.90 885.00
$3,242
$3,242 Goods
Available
for Sale 1,800 $ 9,725.00
Ending
Inventory 1,200
1,200 $ 6,483.00
?
Cost of
Goods Sold 600 $ 3,242.00
?
48
First-In, First-Out Method (FIFO)

Oldest
Oldest Costs
Costs of
of
Costs
Costs Goods
Goods Sold
Sold

Recent
Recent Ending
Ending
Costs
Costs Inventory
Inventory

49
First-In, First-Out Method (FIFO)
Computers, Inc.
Remember: Mouse Pad Inventory
Start with the Date Units $/Unit Total
November 29 Beginning
Inventory 1,000 $ 5.25 $ 5,250.00
purchase and Purchases:
then add other Jan. 3 300 5.30 1,590.00
June 20 150 5.60 840.00
purchases until Sept. 15 200 5.80 1,160.00
you reach the Nov. 29 150 5.90 885.00
number of units Goods
Available
in ending for Sale 1,800 $ 9,725.00
inventory. Ending
Inventory 1,200 ?
Cost of
Goods Sold 600 ?
50
First-In, First-Out Method (FIFO)
Cost of
Date Beg. Inv. Purchases End. Inv. Goods Sold
1,000@$5.25 600@$5.25
400@$5.25
Jan. 3 300@$5.30 300@$5.30
June 20 150@$5.60 150@$5.60
Sept. 15 200@$5.80 200@$5.80
Nov. 29 150@$5.90 150@$5.90
Units 1,200
150 600

Now, we have allocated

Costs $6,575 $3,150
the cost to allNow,
1,200 let’s
Now, let’s complete
units complete the
the
Cost in
of ending inventory.
Goods Available table.
table.
for Sale $9,725

51
First-In, First-Out Method (FIFO)
Computers, Inc.
Completing Mouse Pad Inventory
the table Date
Beginning
Units $/Unit Total

summarizes Inventory 1,000 $ 5.25 $ 5,250.00

Purchases:
the Jan. 3 300 5.30 1,590.00
computations June 20 150 5.60 840.00
Sept. 15 200 5.80 1,160.00
just made. Nov. 29 150 5.90 885.00
Goods
Available
for Sale 1,800 $ 9,725.00
Ending
Inventory 1,200 $ 6,575.00
Cost of
Goods Sold 600 $ 3,150.00
52
Last-In, First-Out Method (LIFO)

Recent
Recent Costs
Costs of
of
Costs
Costs Goods
Goods Sold
Sold

Oldest
Oldest Ending
Ending
Costs
Costs Inventory
Inventory

53
Last-In, First-Out Method (LIFO)
Computers, Inc.
Remember: Start Mouse Pad Inventory
with beginning Date
Beginning
Units $/Unit Total

inventory and Inventory 1,000 $ 5.25 $ 5,250.00

Purchases:
then add other Jan. 3 300 5.30 1,590.00
purchases until June 20 150 5.60 840.00
Sept. 15 200 5.80 1,160.00
you reach the Nov. 29 150 5.90 885.00
number of units Goods
Available
in ending for Sale 1,800 $ 9,725.00

inventory. Ending
Inventory 1,200 ?
Cost of
Goods Sold 600 ?
54
Last-In, First-Out Method (LIFO)
Cost of
Date Beg. Inv. Purchases End. Inv. Goods Sold
1,000@$5.25 1,000@$5.25
Jan. 3 300@$5.30 200@$5.30
100@$5.30
June 20 150@$5.60 150@$5.60
Sept. 15 200@$5.80 200@$5.80
Nov. 29 150@$5.90 150@$5.90
Units 1,000
1,200 100
600

Now, we have allocated

Costs $6,310
Next, $3,415
Next, let’s
let’s
the cost to all 1,200 units complete
completethethe
Cost in
of ending inventory.
Goods Available for Sale $9,725
table.
table.
55
Last-In, First-Out Method (LIFO)
Completing the Computers, Inc.
Mouse Pad Inventory
table Date Units $/Unit Total
Beginning
summarizes the Inventory 1,000 $ 5.25 $ 5,250.00
computations Purchases:
Jan. 3 300 5.30 1,590.00
just made. June 20 150 5.60 840.00
Sept. 15 200 5.80 1,160.00
Nov. 29 150 5.90 885.00
Goods
Available
for Sale 1,800 $ 9,725.00
Ending
Inventory 1,200 $ 6,310.00
Cost of
Goods Sold 600 $ 3,415.00
56
Explain the effects of errors of
inventory valuation on the
income statement

57
Importance of an Accurate Valuation
of Inventory
Errors in Measuring Inventory
Beginning Inventory Ending Inventory
Effect on Income Statement Overstated Understated Overstated Understated
Goods Available for Sale + - NE NE
Cost of Goods Sold + - - +
Gross Profit - + + -
Net Income - + + -
Effect on Balance Sheet
Ending Inventory NE NE + -
Retained Earnings - + + -

An
An error
error in
in ending
ending inventory
inventory in
in aa year
year will
will result
result in
in the
the
same
same error
error in
in the
the beginning
beginning inventory
inventory ofof the
the next
next year.
year.
58
Techniques for Estimating the Cost of
Goods Sold and the Ending Inventory:

There are two ways to estimate the cost of goods

sold and ending inventory. These are
1. Gross profit method and
2. The retail method.

59
The Gross Profit Method
 Determine

Determine cost
cost of
of goods
goods available
available
for
for sale.
sale.
 Estimate

Estimate cost
cost ofof goods
goods sold
sold by by
multiplying
multiplying the
the net
net sales
sales by
by the
the cost
cost
ratio.
ratio.
 Deduct

Deduct cost
cost of
of goods
goods sold
sold from
from cost
cost
of
of goods
goods available
available for
for sale
sale to
to
determine
determine ending
ending inventory.
inventory.

60
 The Gross Profit Method
In
In March
March of of 2007,
2007, Matrix
Matrix Company’s
Company’s inventory
inventory
was
was destroyed
destroyed by by fire.
fire. Matrix
Matrix normal
normal gross
gross
profit
profit ratio
ratio is
is 30%
30% of
of net
net sales.
sales. AtAt the
the time
time of
of
the
the fire,
fire, Matrix
Matrix showed
showed thethe following
following balances:
balances:

Sales
Sales $$ 31,500
31,500
Sales
Salesreturns
returns 1,500
1,500
Beginning
Beginning Inventory
Inventory 12,000
12,000
Net
Net cost
cost of
of goods
goodspurchased
purchased 20,500
20,500

61
 The Gross Profit Method
Estimating Inventory
The Gross Profit Method
Goods Available for Sale:
Step 1 Beginning Inventory $ 12,000
Net cost of goods purchased 20,500
Goods available for sale $ 32,500
Less estimated cost of goods sold:
Sales $ 31,500
Step 2 × 70%
Less sales returns (1,500)
Net sales $ 30,000
Estimated
Estimated
cost
cost
ofof
goods
goodssold
sold (21,000)
Step 3 Estimated March inventory loss $ 11,500

62
 The Retail Method
The
The retail
retail method
method of
of estimating
estimating inventory
inventory requires
requires
that
that management
management determine
determine the the value
value of
of ending
ending
inventory
inventory at
at retail
retail prices.
prices.
In
In March
March of
of 2007,
2007, Matrix
Matrix Company’s
Company’s inventory
inventory was
was
destroyed
destroyed by
by fire.
fire. At
At the
the time
time of
of the
the fire,
fire, Matrix’s
Matrix’s
management
management collected
collected the
the following
following information:
information:
Information for Matrix Company
The Retail Method
Goods available for sale at cost $ 32,500
Goods available for sale at retail 50,000
Physical count of ending inventory priced at retail 22,000
63
The Retail Method
Matrix
Matrix would
would follow
follow the
the steps
steps below
below to
to estimate
estimate
their
their ending
ending inventory
inventory using
using the
the retail
retail method.
method.

Estimating Inventory
The Retail Method
a Goods available for sale at cost $ 32,500
b Goods available for sale at retail 50,000
c Cost ratio [a b] 65%
d Physical count of ending inventory priced at retail 22,000
e Estimated ending inventory at cost [ c d] $ 14,300

64
 Taking a Physical Inventory

••The
The primary
primary reason
reason for
for taking
taking aa physical
physical inventory
inventory is
is to
to
adjust
adjust the
the perpetual
perpetual inventory
inventory records
records for
for unrecorded
unrecorded
shrinkage
shrinkage losses,
losses, such
such as
as theft,
theft, spoilage,
spoilage, or
or breakage.
breakage.
••The
The cost
cost ofof the
the missing
missing or
or damaged
damaged units
units are
are removed
removed
from
from the
the inventory
inventory records
records using
using the
the same
same assumption
assumption as
as is
is
used
used in
in recording
recording the
the costs
costs of
of goods
goods sold.
sold.

65
•If shrinkage loss are small, the costs removed
from inventory may be charged directly to the
cost of goods sold account.
•If the losses are material in amount the
offsetting debit should be entered in special loss
account, such as Inventory shrinkage Loss.

66
 LCM and Other Write-Downs of Inventory
 In addition to shrinkage losses, the value of inventory may decline
Because of its obsolete or un-salable for other reasons.
 If inventory is obsolete or is otherwise un-salable, its carrying value in
the accounting records should be written down to zero ( or its scrape
vale)
 If the write down is relatively small, the loss is debited directly to the
cost of goods sold account.
 If the write down is material in amount, it is charged to a special loss
account, entitled loss from write down of inventory.

Reduces
Reduces the
the value
value of
of the
the
Obsolescence
Obsolescence inventory.
inventory.

Lower
Lower of
of Cost
Cost or
or Adjust
Adjust inventory
inventory value
value to
to
Market
Market (LCM)
(LCM) the
the lower
lower of
of historical
historical
cost
cost or
or current
current
replacement
replacement cost
cost 67
(market).
 LCM and Other Write-Downs
of Inventory
LCM Applied on the Basis of . . .
Individual Inventory Total
Cost Market Items Category Inventory
Bicycles:
Boy's bicycles $ 4,200 $ 4,600 4,200
Girls bicycles 3,800 3,100 3,100
Junior bicycle 5,700 5,000 5,000
Total $ 13,700 $ 12,700 12,700
Bicycle accessories:
Training wheels $ 485 $ 525 485
Headlamps 312 400 312
Protective helmets 700 600 600
Gloves 245 212 212
Kneepads 195 145 145
Total $ 1,937 $ 1,882 1,882
Total inventory $ 15,637 $ 14,582 $ 14,054 $ 14,582 $ 14,582

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