Different accounting methods

In this Web Field Trip, you will research some information about the inventories of two major companies that sell merchandise to customers online: Amazon.com and Dell Inc.

Amazon      http://phx.corporate-ir.net/phoenix.zhtml?p=irol- irhome&c=97664   

Click on Annual Reports and Proxies, and then the most recent Annual Report. Then click on Financial Statements and Supplementary Data and find Amazon's balance sheet and the Notes to the financial statements. Determine how Amazon accounts for its inventories, and calculate the percentage of inventory in relation to total assets.

Dell Inc.     http://content.dell.com/us/en/corp/about-dell-investor- info.aspx?c=us&l=en&s=corp  

Click Financials and then on the left hand side click on 10-K Filings. You will see several options for viewing reports--the PDF will be easiest to navigate. Download the most recent Form 10-K (Annual Report) and click on Financial Statements and Supplementary Data in the menu on the left. Find Dell's balance sheet and the Notes to the financial statements. Determine how Dell accounts for its inventories, and calculate the percentage of inventory in relation to total assets.

Discussion Question   

In your Web Field Trip, you were asked to look at the balance sheets and the Notes to the financial statements of Amazon.com and Dell Inc. and determine how each company accounts for its inventory and each company's percentage of inventory to total assets.

1. What method does each company use to account for its inventories?
2. How are the inventories of the two companies different?
3. What is each company's percentage of inventory to total assets? Explain why these percentages may be different.
4. Assume you are the Chief Financial Officer (CFO) for Dell and the Chief Executive Officer (CEO) asks you to look into changing valuation methods for Dell. What factors would you have to consider? Check out these references to assist you with your analysis.
   1. http://blog.accountingcoach.com/products-fifo-lifo/
   2. http://findarticles.com/p/articles/mi_m0ITW/is_2_85/ ai_n14897182/
   3. http://www.helium.com/items/112379-understanding-the- difference-between-fifo-and-lifo