Financial accounting Chapter 6 Question 19 - p. 301

19) In an annual report, Craftmade International, Inc.,describes its inventory accounting policies as follows:

Inventories are stated at the lower-of-cost-or-net-realizablevalue, with inventory cost determined using the first-in, first-out(FIFO) method. The cost of inventory includes freight-in and dutieson imported goods.

Also in an annual report, Kaiser Aluminum Corporationmade the following statement in discussing its inventories:

The company recorded pretax charges of approximately $19.4million because of a reduction in the carrying values of itsinventories caused principally by prevailing lower prices foralumina, primary aluminum, and fabricated products.

What accounting principle did Craftmade International followwhen it included the costs of freight-in and duties on importedgoods in its Inventory account? Briefly describe how a firmdetermines which costs to include in its inventory account. Whataccounting principle did Kaiser Aluminum follow when it recordedthe $19.4 million pretax charge? Briefly describe the rationale forthis principle.