Learning objectives (with links to notes for each objective below)

• LO8-01: Explain the types of inventory and the differences between a perpetual inventory system and a periodic inventory system.

• LO8-02: Explain which physical units of goods should be included in inventory.

• LO8-03: Account for transactions that affect net purchases and prepare a cost of goods sold schedule.

• LO8-04: Differentiate between the specific identification, FIFO, LIFO, and average cost methods used to determine the cost of ending inventory and cost of goods sold.

• LO8-05: Discuss the factors affecting a company's choice of inventory method.

• LO8-06: Understand supplemental disclosures of LIFO reserves and the effect of LIFO liquidations on net income.

• LO8-07: Calculate the key ratios used by analysts to monitor a company's investment in inventories.

• LO8-08: Determine ending inventory using the dollar-value LIFO inventory method.