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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 15015  
Subject: Re: Help with Inventory and Books Date: 8/14/2012 10:46 PM
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<< If you buy a lot of so many items, it would be reasonable to list each item in your inventory and assign a prorated value to it based on the purchase price.

This is what I was thinking. Kind of estimate what I think each item will sell for, what its market value is, tot it all up and then get a ratio with which to multiply against what I paid for it and get a cost for each item. I can do this. >>

Actually, what I'd do is pro rate your cost based on the price you pay divided by the number of pieces. There's no real need to be fancy estimating what this piece or that piece cost.

You bought ten pieces for $100? The cost of each piece is $10.

Let's suppose that's your only purchase and you sell two pieces, one for $31 and the other for $5.

Your inventory shows eight pieces cost $10 each, so your end of year inventory value is $80.

Your purchases totaled $100.

Your cost of goods sold is $100-$80 or $20.

Your gross sales were $31 + $5 or $36.

Your gross profit is sales - cost of goods sold

$36 - $20 = $16

You can have as big an inventory as you like, but you can't count it as a business expense until you sell it.

Seattle Pioneer
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