Which cost method does Amazon use for inventories? How does Amazon value its inventories?

The notes are an important part of a company’s financial statements, giving valuable details that would clutter the tabular data presented in the statements. This case will help you learn to use a company’s inventory notes. Refer to the financial statements and related notes in Appendix A at the end of the book, and answer the following questions:

Requirements

1. How much was the Amazon merchandise inventory at December 31, 2009? At December 31, 2008?

2. Which cost method does Amazon use for inventories? How does Amazon value its inventories?

See Note 1.

3. By rearranging the cost-of-goods-sold formula, you can compute purchases, which are not reported in the Amazon statements. How much were Amazon’s inventory purchases during 2009?

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