Measuring and Reporting Inventories

Learning objectives

After studying this chapter, you should be able to:

Explain and calculate the effects of inventory errors on certain financial statement items.
Indicate which costs are properly included in inventory.
Calculate cost of ending inventory and cost of goods sold under the four major inventory costing methods using periodic and perpetual inventory procedures.
Explain the advantages and disadvantages of the four major inventory costing methods.
Record merchandise transactions under perpetual inventory procedure.
Apply net realizable value and the lower-of-cost-or-market method of inventory.
Estimate cost of ending inventory using the gross margin and retail inventory methods.
Analyze and use the financial results- inventory turnover ratio.