investment tools financial statement analysis assets

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1、九InvestmentTools:FinancialStatementAnalysis:Assets1.A:AnalysisofInventoriesa:ComputeendinginventorybalancesandcostofgoodssoldusingtheLIFO,FIFO,andaveragecostmethodstoaccountforproductinventory.Example:Giventhefollowinginventorydata:January1(beginninginventory

2、):2units@$2perunit=$4January7purchase:3units@$3perunit=$9January19purchase: 5units@$5perunit=$25Costofgoodsavailable(BI+P): 10units=$38UnitssoldduringJanuary: 7unitsFIFOcostofgoodssold(valuethe7unitssoldatunitcostoflastunitspurchased).Startatthetopandworkdown

3、:Frombeginninginventory:2units@$2perunit=$4Fromfirstpurchase:3units@$3perunit=$9Fromsecondpurchase:2units@$5perunit=$10FIFOcostofgoodssold:7units=$23Endinginventory:3units@$5=$15LIFOcostofgoodssold(valuethe7unitssoldatunitcostoffirstunitspurchased).Startatthe

4、bottomandworkup:Fromsecondpurchase:5units@$5perunit=$25Fromfirstpurchase:2units@$3perunit=$6LIFOcostofgoodssold:7units=$31Endinginventory:2@$2+1@$3=$7Averagecostofgoodssold(valuethe7unitssoldattheaverageunitcostofgoodsavailable).Averageunitcost=$38/10=$3.80pe

5、runitWeightedaveragecostofgoodssold=7@$3.80=$26.60Endinginventory=3@$3.80=$11.40b:Explaintheusefulnessofinventoryandcost-of-goods-solddataprovidedbytheLIFO,FIFO,andaveragecostmethodswhenpricesare1)stable,or2)rising.Balancesheet:InventoriesbasedonFIFOareprefer

6、ablesincethesevaluesmostcloselyresemblecurrentcostandhencecurrenteconomicvalue.GAAPrequiresthatfirmsusethelowerofcostormarketwhenvaluinginventory.Applyingthelower-of-cost-or-markettotheinventorycalculatedunderanycostflowassumptionwoulddecreaseincomeandinvento

7、ryonthebalancesheetifmarketislowerthancost.Ifassignedcoststoendinginventoryusingoneofthecostflowassumptions(LIFO,FIFO,oraveragecost)isgreaterthanthereplacementmarketcostofthatinventory,thenthatendinginventorymustbewritten-downtomarket.Thisruleisappliedindivid

8、uallytoeachmajorclassificationofinventory.Inventoryisnotchangedifmarketpriceisgreaterthancost.Thispotentiallyincreasescostofgoodssoldanddecreasesnetincomeandcurrentassets.Incomestatement: