LEARNING OBJECTIVES:

After studying this chapter, you should be able to:

Identify major classifications of inventory.

• Distinguish between perpetual and periodic inventory systems.

• Determine the goods included in inventory and the effects of inventory errors on the financial statements.

• Understand the items to include as inventory cost.

• Describe and compare the cost flow assumptions used to account for inventories.

• Explain the significance and use of a LIFO reserve.

• Understand the effect of LIFO liquidations.

• Explain the dollar-value LIFO method.

• Identify the major advantages and disadvantages of LIFO.

• Understand why companies select given inventory methods.