Accounting for Inventory

Question

Dec 30, 2007, 07:04 PM

gwmcmullen

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Join Date: Dec 2007

Posts: 1

Accounting for Inventory

I have a small Residential construction company and for the first time I have a completed house that's no longer WIP but inventory for sale. Although this is real estate it's inventory held for sale and not a fixed asset for my company. My problem comes in recording the value of this complete product in inventory. If this inventory is recording at FMV there is a mark up from my manufacturing cost. If recorded at cost it understates the true value on the balance sheet. How is this transaction recorded according to GAAP.

Answers

Dec 30, 2007, 10:22 PM	#2

CaptainForest Finance & Accounting Expert Join Date: Nov 2005 Location: Canada Posts: 3,658	Under GAAP, inventory is recorded at the lower of cost or market. So if the cost if 100,000 and the FMV is 200,000, you record it at 100,000

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