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Form C







The intent of this survey is to obtain information concerning expenditures processed through the central accounting system that must be reclassified as asset additions for financial reporting purposes.



Inventories are defined as the aggregate of those items of tangible personal property which are held for sale in the normal course of business (e.g., supplies), or are to be consumed within one year in the production of a service (e.g., fuel). 


The matching of revenue and costs is an important objective in accounting for inventories to ensure the proper determination of income in accordance with generally accepted accounting principles (GAAP).  The basis of accounting for inventories is cost, which has been defined as the price paid or the consideration given to acquire an asset.  When the utility of the goods, in the ordinary course of business, is no longer as great as their cost, a departure from the cost basis principle of measuring inventory is required (e.g., obsolescence, physical deterioration, changes in price levels).  When this occurs, inventories should be stated at the lower of cost or market (market meaning current replacement cost) and a loss should be recorded in the current period.


The value of inventory is determined by a physical count on a specific date and is recorded by valuing the actual inventory count in accordance with the inventory method used (e.g., FIFO, LIFO, weighted average, specific identification).


The FIFO (first-in, first-out) method of valuing inventory is illustrated below and is the preferred method.  This method of recording inventories is based on the assumption that costs should be charged against revenue in the order in which they occurred.  The inventory remaining on hand is presumed to consist of the most recent costs.  The first goods acquired are the first goods out, and the last goods acquired are in the ending inventory.


                                                        Units Purchased During the Year


                        Date                      Units                           Cost/Unit                Total Cost


                  August 15               20,000                               5.20                  $ 104,000

                  November 22         50,000                               5.00                      250,000

                  January 1                30,000                               5.40                      162,000

                  March 6                     5,000                               5.30                        26,500

                  May 26                      5,000                               5.50                        27,500

                                                 110,000                                                         $ 570,000

Assume:  Beginning Inventory is 10,000 units @ $5.00.

Ending Inventory per physical count is 14,000 units.


FIFO Inventory Value


                                  May 26                  5,000 units @ 5.50 =            $ 27,500

                                   March 6                5,000 units @ 5.30 =               26,500

                                   January 1              4,000 units @ 5.40 =               21,600

                                                                14,000                                      $ 75,600





Report all material inventories as of June 30 on the attached worksheet to Exhibit II.  Materiality is defined as a component greater than or equal to $5,000.  Only include inventories purchased through appropriated State funds (i.e., state purpose, IFR, hospital, dorm, etc.).  Do not include inventories held by an Auxiliary Service Corporation or Research Foundation.


The value of inventories should be based on physical counts performed as of June 30.  The recommended method for costing inventories is the FIFO method, although other methods are permitted if they more clearly reflect periodic income.  Please state the method used when completing Exhibit III.


Some examples of inventory components include hospital pharmaceuticals and supplies; central, maintenance, mechanical and electrical stores; fuel, diesel, and coal; office and computer supplies; lumber; fabric; hand tools; and postage.