Essay Asset Valuation

2313 Words Mar 24th, 2008 10 Pages
Asset Valuation
Introduction
The intent of this paper is to describe to the CEO Team B’s recommendation for reporting and valuing assets. Included in this paper is a synopsis of the company’s business plan and the related inventory control and capitalization policy. The authors’ of this paper will also justify why each policy was chosen and evaluate how the policies assists our business to meet its goals. Finally, alternative methods will be discussed with regard to why they were not chosen.
Type of Business
Practice Team B intends to do business as a provider of Durable Medical equipment (DME) and prosthetics, orthotics, and supplies (POS). Team B chose this merchandise to sell retail as Medicare Part B covers a wide range of DME
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Our team agrees that we will accomplish our goals by maintaining updated valuation of assets through regularly conducted analysis’s of current inventory value, (Lindo. Jan 2008).
Inventory Costing and Inventory Management
Team B recognizes that the cost of goods sold is a process of accounting for the flow of costs from the inventory (asset) account of the balance sheet to the cost of goods sold (expense) account of the income statement. There are two types of inventory systems: the perpetual system and the periodic system. The perpetual system allows managers to know with a great deal of precision what equipment is in stock at any given time. In contrast, the periodic system usually entails a full count of inventory once per period/per year. Team B chooses the policy of the perpetual inventory system, in that it will allow us to know what equipment is in stock at any given time (Markelevich, Bell. Aug 2006). The application of appropriate technology will allow a greater amount of inventory control while still providing a positive cost/benefit analysis. However, the use of a perpetual inventory system does not remove the need to perform periodic inventory reconciliations. As a result, Team B’s inventory control process will include on a monthly basis:
1. Identification of obsolete inventory items
2. Disposal of idle capital equipment
3. Calculation of "true" book values of on hand inventory
4. Verification that all

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