Reference no: EM131151164
Inventory Costing and Intangible Assets- Accounting Majors only - Please give your opinion to the article with cited work
With FIFO (First In, First Out), the oldest products are the first sold. This appealed to me as the most logical. I picture items being stocked on a grocery store shelf; oldest inventory moved to the front of the shelf, newer arrival product placed in the back. (Of course, those items are often perishable which dictates FIFO use.) But this seemed the best to me....then I read that FIFO is accepted internationally (as opposed to LIFO) so it appeared that the rest of the world thought it made the most sense, too.
After learning about LIFO (Last In, First Out), however, I realized the benefits to income tax reduction seemed brilliant! When price are rising (inflation) the cost of goods sold is higher - resulting in lower taxable income.
LIFO may result in ending inventory "...that is priced well below its replacement cost." (Williams) By the same token... future declines in market have less impact on LIFO because most recent (generally higher cost items) are sold first. Any product acquired at a lower price will coincide with market downturn pricing.
Of course, inventory may be understated because the inventory figure is then based on oldest (often lower) costs in the case of inflation.
LCM (Lower-of-Cost-or-Market) Rule - In this case, inventory on a balance sheet is valued at the lower of either its cost or its market value (current replacement cost). "When the cost equals the market value, no gain or loss is recognized. When the cost is greater than the market value, a loss is recognized." (www.myaccountingcourse.com)
With this information, I turned back to my Module 3 financial statement from CVS Health to see what the financial statement disclosed about their inventory methods:
Inventory Accounting Policy
All inventories are stated at the lower of cost or market. Prescription drug inventories in the RLS and PSS, as well as front store inventories in the RLS stores are accounted for using the weighted average cost method. Physical inventory counts are taken on a regular basis in each retail store and long-term care pharmacy and a continuous cycle count process is the primary procedure used to validate the inventory balances on hand in each distribution center and mail facility to ensure that the amounts reflected in the accompanying consolidated financial statements are properly stated. During the interim period between physical inventory counts, CVS Health accrues for anticipated physical inventory losses on a location-by-location basis based on historical results and current trends.
Source: CVS Health Corp., Annual Report
Very interesting to go back and look for this information!!
https://investors.cvshealth.com/~/media/Files/C/CVS-IR-v3/reports/2015-annual-report.pdf
Williams, J. (2016). Financial & managerial accounting. Place of publication not identified: Mcgraw-Hill Irwin.
The supplier behind defective air bags
: Takata Airbag Quality Takata Corp., the supplier behind defective air bags in millions of recalled vehicles, lacks clear processes for tackling potential safety defects and needs improved manufacturing methods, an independent panel found. Takata empl..
|
How are responsibility centers used to incentivize managers
: How are responsibility centers used to incentivize managers? In a theft investigation, does John Doe's signature on a document mean that John Doe signed it?
|
What is the yearly average cycle inventory for this item
: Inventory Control Problem Johnson Corporation has the following information about a product (SKU) that it carries in stock: What is the optimal order size for the company to minimize their annual inventory cost for this item? What is the yearly aver..
|
Determine the minimum sampling rate
: Determine the minimum sampling rate required to avoid aliasing. - what is the discrete time signal obtained after sampling?
|
What the financial statement disclosed about the inventory
: With this information, I turned back to my Module 3 financial statement from CVS Health to see what the financial statement disclosed about their inventory methods
|
How to create a convenient free station control point
: On a busy construction site, most control stations are blocked from a proposed area of layout. Describe how to create a convenient free station control point using resection techniques.
|
Supply chain strategies
: Supply chain strategies, and what considerations the managers need to make, why do you believe it is important of understand this considerations? What can happen if you don’t take in these considerations?
|
What is the thesis of the article
: Access the GCU Library. Select an article that deals with socially responsible marketing and ethics. In a paper of 500-750 words, summarize the article, addressing the following questions: What is the purpose of the article? What is the thesis of the..
|
Define law of junction
: Explain about the term cut-in voltage associated with pn junction diode. -How do you obtain cut-in voltage from forward V-I characteristics?
|