Conceptual objectives:

1. Identify the items making up merchandise inventory.
2. Identify the costs of merchandise inventory.

Analytical objectives:

1. Analyze the effects of inventory methods for both financial and tax reporting.
2. Analyze the effects of inventory errors on current and future financial statements.
3. Assess inventory management using both inventory turnover and days’ sales in inventory.

Procedural objectives:

1. Compute inventory in a perpetual system using the methods of specific identification, FIFO, LIFO, and weighted average.
2. Compute the lower of cost or market amount of inventory.
3. Appendix 5A—Compute inventory in a periodic system using the methods of specific identification, FIFO, LIFO, and weighted average.
4. Appendix 5B—Apply both the retail inventory and gross profit methods to estimate inventory.