Groupon, Kimberly Clark, Stone Ridge, Sherwin Williams
Ch. 6
Goods on Consignment
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This occurs when a company gives inventory to another company to sell for them.
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The Manufacturer would report the inventory for this on their balance sheet even though they
have given it to (X company) to sell it for them.
Reporting Gross Profit
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Gross Method
o
Can only use it if you have ownership characteristics. (Risks of being an owner).
Cannot use it if acting as a middleman.
Or broker.
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Net Method
o
See Notepad
Lower of Cost and Net Realizable Value
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Inventory recorded at less than cost when:
o
The future value of inventory is lower than cost due to damage, usage, obsolescence,
etc.
o
Or if it can be replaced at less than the original cost.
