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Inventory Items \& Costs' A. Items in Inventory e 1. All goods owned by a company that are for 2. Goods in Transit-FOB. 3. Goods on Consignment-are owned by the 4. Goods Damaged or Obsolete? a. included if unsalabler b. if salable, report at the net realizable value (NRV) c. NRV= sales price less costs of the salef B. Cost of Inventory 1. All expenditures necessary to bring item to a salable and 2. Includes invoice price less discount plus import dutics, transportation-in, storage, insurance, and aging costs if any" C. Physical Count? 1. Taken at end of fiscal year 2. Used to adjust the inventory account to actual on hand II. Assigning Costs to Inventory (Perpetual System) C C. Methods of 'Assigning Costs to Inventory \& COGS! 1. a. each purchase and sale is directly identified with specific items in inventory and charged with actual cost 2. s. assumes inventory items are sold in the order acquired b. + carliest units aro charged to COGS c. most recent units remain in inventory 3. a. assumes the most recent purchases are sold first" b. earliest units are assigned to ending inventory! c. most recent units are charged to COGS" 4. a. computes the average cost per unit at the time of each sale and charges this to COGS leaving the remainder in inventory

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