Chapter 8 Valuation of Inventories

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Please see the Inventory Valuation tab in your workbook, to review application of costs using the FIFO, LIFO, and average methods based on purchase and sales information. You will choose the method

The process requires Peyton Approved to discover how much inventory is sold and what the cost of goods will result in. The process requires the business to review three forms of merchandise inventory to determine which summary benefits the business’s operational behavior. One will discover when assuming that first inventory purchased by the store is the first to be sold, it is determined that the FIFO method displays the best financial outcome for the business. During the process of updating journal entries, one must enter the information proved appropriately into the T-accounts to add the balance under each record. Once the T-accounts for transactions and adjusted transactions are balanced, the next step is to enter the information provided on the balance sheet. The balance sheet will list Peyton Approved assets, liabilities and stockholders equity after added during the T-account process (Nobles, 2014). Once the balance sheet is completed the income statement, statement of retained earnings, and closing entries can be filled with the information proved. This will give the business a full review from journal entry to closing entries of the business for the six month accounting

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330-10-30330-10-30-1 The primary basis of accounting for inventories is cost, which has been defined generally as the price paid or consideration given to acquire an asset. As applied to inventories, cost means in principle the sum of the applicable expenditures and charges directly or indirectly incurred in bringing an article to its existing condition and location. It is understood to mean acquisition and production cost, and its determination involves many considerations. 330-10-30330-10-30-2 Although principles for the determination of inventory costs may be easily stated, their application, particularly to such inventory items as work in process and finished goods, is difficult because of the variety of considerations in the allocation of costs and charges.

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Since the Walgreen Company sells products as the retailer or manufacturer it may find the cost of its products increases or rises high the company should use the LIFO method of inventory (Porter & Norton, 2013). According to Hughes and Schwartz (2014), the use of LIFO method of inventory helps a company buys or sells will less taxable income and less income tax payments than FIFO. Porter and Norton also found that when the prices are rising frequently, then a company should use the LIFO method. Therefore, the Walgreen Company uses the Last-In, First-Out (LIFO) Method. It is also equally important that the Walgreen Company should use the LIFO method of Inventory costing because the cost of last accrued items should be assigned firs tot sales

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Inventory expenditures may be recognized using either purchase method or consumption basis. The consumption method is a method of accounting for inventories and prepaid costs, such as rent, insurance, materials and supplies, in which goods or services are recorded as expenditures or expenses when used rather than when purchased. Some accountant believe that the year-end inventory should be offset with a fund balance which is non-spendable when no comparable balance is required for cash, taxes receivable, or other assets, and this paper is going to address why some accountant believe in that and how should government report their capital projects and debt services activities in the government-wide statement.