# Inventory Question

A

#### Andrew McKendrick

Hi,

I have a question that I was hoping an accountant out there could answer.

Assume the following:

[1] I buy a new part at \$50.00
[2] The part is received into inventory at \$50.00.
[3] When I take the part out of inventory it is issued at whatever cost
the current costing method (LIFO, FIFO, AVG COST) is in use. For this
example, let's say \$45.00.

Up to this point, I'm okay.

Now lets say that a worker brings a part back into the stock room - one that
has been used but is still functional. What cost does this other part go
into inventory at? And how should that cost affect the cost of the item
(under the costing method) if at all?

Any help would be greatly appreciated.

Andrew

G

#### Gary V. Deutschmann, Sr.

Andrew McKendrick said:
Hi,

I have a question that I was hoping an accountant out there could answer.

Assume the following:

[1] I buy a new part at \$50.00
[2] The part is received into inventory at \$50.00.
[3] When I take the part out of inventory it is issued at whatever cost
the current costing method (LIFO, FIFO, AVG COST) is in use. For this
example, let's say \$45.00.

Up to this point, I'm okay.

Now lets say that a worker brings a part back into the stock room - one that
has been used but is still functional. What cost does this other part go
into inventory at? And how should that cost affect the cost of the item
(under the costing method) if at all?

Any help would be greatly appreciated.

Andrew
That's a simple one Andrew!

It goes back into stock for the lowest sale price that month and you
charge the worker a 20% restocking charge<G>.
You run it through the shrink wrap machine and resell it again as new!

Under the costing method, you would indicate HEAVY inventory
shrinkage!
You buy 100 parts at 50 bucks each, take them back out at 45 bucks
each. Inventory shrunk by 500 bucks!
You can blame the shrinkage on that employee that nobody likes and get
rid of them.

And I didn't say Sears once!

TTUL
Gary

J

#### J

snip
Now lets say that a worker brings a part back into the stock room - one that
has been used but is still functional. What cost does this other part go
into inventory at? And how should that cost affect the cost of the item
(under the costing method) if at all?

Any help would be greatly appreciated.

Andrew
Why don't you use a new inventory line of Widget (SUBWK)*
(Assume, you didn't pay anything for them, you can apply any std cost you
like).

*SUBS: Slightly Used but Who Knows