Inventory Valuation : The evaluation or estimation of monetary worth of inventory bought in order to ascertain the cost of goods sold is termed as inventory valuation or inventory costing. Inventory valuation helps to ascertain the cost of goods sold and the cost of closing inventory. There are majorly four methods used for costing of inventory: First in, first out method; Last in, first out method Weighted average costing method Specific identification method. First in, first out method: In first in first out method, also known as FIFO method, the inventory which was bought first will be the first one to be taken out. Last in, first out method: In case of last in, first out, also known as LIFO method, the inventory which was bought in the last will be taken out first. Weighted average cost method: In this method the weighted average cost is evaluated after any purchases have been made and transactions are recorded as when purchase or sales take place. Specific identification method: Under this method, a continuous track of the inventory needs to be maintained and the inventory cost is evaluated at the time of purchase, on the basis of unique identity which also helps in the valuation of the ending inventory as well as the cost of goods sold. This method is generally used when the company is involved in limited expensive goods which are easily identifiable. To Identify: The inventory costing method which best to describe the given statements. 1.

Question

Want to see the full answer?

Answer 1

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 18QS

To determine

Inventory Valuation:

The evaluation or estimation of monetary worth of inventory bought in order to ascertain the cost of goods sold is termed as inventory valuation or inventory costing. Inventory valuation helps to ascertain the cost of goods sold and the cost of closing inventory.

There are majorly four methods used for costing of inventory:

First in, first out method;

Last in, first out method

Weighted average costing method

Specific identification method.

First in, first out method:

In first in first out method, also known as FIFO method, the inventory which was bought first will be the first one to be taken out.

Last in, first out method:

In case of last in, first out, also known as LIFO method, the inventory which was bought in the last will be taken out first.

Weighted average cost method:

In this method the weighted average cost is evaluated after any purchases have been made and transactions are recorded as when purchase or sales take place.

Specific identification method:

Under this method, a continuous track of the inventory needs to be maintained and the inventory cost is evaluated at the time of purchase, on the basis of unique identity which also helps in the valuation of the ending inventory as well as the cost of goods sold. This method is generally used when the company is involved in limited expensive goods which are easily identifiable.

To Identify: The inventory costing method which best to describe the given statements.

1.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Identify the inventory costing method (SI, FIFO, LIFO, or WA) best described by each of the following separate statements. Assume a period of increasing costs. 1. Results in the highest cost of goods sold. 2. Yields the highest net income. 3. Has the lowest tax expense because of reporting the lowest net income. 4. Better matches current costs with revenues. 5. Precisely matches the costs of items with the revenues they generate.

Identify the inventory costing method (SI, FIFO, LIFO, or WA) best described by each of the following separate statements. Assume a period of increasing costs. 1. Precisely matches the costs of items with the revenues they generate. 2. Better matches current costs with revenues. 3. Yields the highest net income. 4. Tends to smooth out the erratic changes in costs. 5. Inventory on the balance sheet approximates its current cost.

Which inventory costing method produces a more accurate income statement – FIFO or LIFO? ___________ Provide brief explanation.

Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 18QS

To determine

Inventory Valuation:

The evaluation or estimation of monetary worth of inventory bought in order to ascertain the cost of goods sold is termed as inventory valuation or inventory costing. Inventory valuation helps to ascertain the cost of goods sold and the cost of closing inventory.

There are majorly four methods used for costing of inventory:

First in, first out method;

Last in, first out method

Weighted average costing method

Specific identification method.

First in, first out method:

In first in first out method, also known as FIFO method, the inventory which was bought first will be the first one to be taken out.

Last in, first out method:

In case of last in, first out, also known as LIFO method, the inventory which was bought in the last will be taken out first.

Weighted average cost method:

In this method the weighted average cost is evaluated after any purchases have been made and transactions are recorded as when purchase or sales take place.

Specific identification method:

Under this method, a continuous track of the inventory needs to be maintained and the inventory cost is evaluated at the time of purchase, on the basis of unique identity which also helps in the valuation of the ending inventory as well as the cost of goods sold. This method is generally used when the company is involved in limited expensive goods which are easily identifiable.

To Identify: The inventory costing method which best to describe the given statements.

1.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 18QS

To determine

Inventory Valuation:

The evaluation or estimation of monetary worth of inventory bought in order to ascertain the cost of goods sold is termed as inventory valuation or inventory costing. Inventory valuation helps to ascertain the cost of goods sold and the cost of closing inventory.

There are majorly four methods used for costing of inventory:

First in, first out method;

Last in, first out method

Weighted average costing method

Specific identification method.

First in, first out method:

In first in first out method, also known as FIFO method, the inventory which was bought first will be the first one to be taken out.

Last in, first out method:

In case of last in, first out, also known as LIFO method, the inventory which was bought in the last will be taken out first.

Weighted average cost method:

In this method the weighted average cost is evaluated after any purchases have been made and transactions are recorded as when purchase or sales take place.

Specific identification method:

Under this method, a continuous track of the inventory needs to be maintained and the inventory cost is evaluated at the time of purchase, on the basis of unique identity which also helps in the valuation of the ending inventory as well as the cost of goods sold. This method is generally used when the company is involved in limited expensive goods which are easily identifiable.

To Identify: The inventory costing method which best to describe the given statements.

1.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 5, Problem 18QS

To determine