INVENTORIES

Ag Business ManagementAg Business Management

Spring 1999Spring 1999

Objectives

Explain the importance of an accurate inventory.

Determine when to inventory assets.Identify assets to be included in an

inventory.Describe the method used to

determine value.

Glossary

ACRSAcquisitionsAssetCash accountingCapitalCapital gainsCollateral

Consumable supplies

Contingent liabilities

CreditDepreciable

assetsDepreciation

Glossary

Depreciation methods

Depreciation system

Estate tax Financial

statement Fiscal year

Gift taxIncome

statementInheritance taxInventoryMACRSNon-depreciable

asset

Glossary

Owner-equity statement Salvage valueStraight line methodUseful life

Why Inventories are Important

Owner Equity StatementsIncome StatementsObtaining CreditInsuranceEstate PlanningTax Management

Owner Equity Statements

Show an accurate account of financial standing at a specific point in time.

Cannot develop balance sheet without completed inventory.

Income Statements

Inventory needed to calculate income statement.

Changes in inventory affect income.

Obtaining Credit

Financial institutions need accurate inventories before granting credit.

Assets may be used as collateral to secure loan.

Insurance

Inventories needed to determine premium cost & coverage.

Inventories needed to determine payment in event of loss or damage.

Estate Planning

Needed to plan an estate.

Always necessary in settlement situations.

Tax Management

Inventory management key in tax management strategies.

Especially important with property tax valuation & capital gains tax.

Items to be Inventoried

Items for resale

Consumable supplies

Capital Assets

Inventories

M arke t L ives tock C rop s in S to rag e B ed d in g P lan t

Item s fo r R esa le

Inventories

C h em ica ls F u e l S eed F eed F ertilize r

C on su m ab les

Inventories

B reed in gA n im a ls

M ach in ery E q u ip m en t

Im p rovem en ts

L an d B u ild in g s Too ls

C ap ita l A sse ts

How to Determine Inventory Values

Cost Minus DepreciationCurrent Market ValueStraight Line DepreciationAccelerated Cost Recovery System

(ACRS)Modified Accelerated Cost Recovery

System (MACRS)