RSM324H1 Chapter Notes - Chapter 5: Tax Avoidance, Direct Selling
15 Feb 2017
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Treatment of inventories: the ita specifically permits the closing inventory to be valued using one of 2 methods: Value each item of inventory at the lower of its cost or market value. Value all items of inventory at their market value. **each of these methods is likely to produce a different ending inventory value and, as a result, a different profit for tax purposes. This variance is only temporary, since ultimately a business must expense its full costs: whe(cid:374) possi(cid:271)le, (cid:862)(cid:272)ost(cid:863) (cid:396)efe(cid:396)s to the a(cid:272)tual (cid:272)ost of ea(cid:272)h spe(cid:272)ifi(cid:272) ite(cid:373) u(cid:374)sold at the e(cid:374)d of the period (specific identification method) Inventory consists of the most recent purchases and that the first goods purchased were the first goods sold (fifo) In manufacturing concerns, inventory consists of finished goods ready for sale, unfinished goods (wip), and raw materials. The selling price of finished goods can be reasonably estimated but is difficult to obtain for unfinished goods and raw materials.
