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Identify the Inventory Valuation Method That Is Being Described for Each

Question 211

Matching

Identify the inventory valuation method that is being described for each situation below.In all cases,assume a period of rising prices.Use the following to identify the inventory valuation method:

Premises:
The method that will cause the company to have the lowest cost of goods sold.
The method that will assign a value to inventory that approximates its current cost.
The method that will tend to smooth out erratic changes in costs.
The method that will cause the company to have the lowest income taxes.
The method that can only be used if each inventory item can be matched with a specific purchase and its invoice.
Responses:
LIFO(Last in, first out)
FIFO(First in, first out)
WA(Weighted average)
SI(Specific identification)

Correct Answer:

The method that will cause the company to have the lowest cost of goods sold.
The method that will assign a value to inventory that approximates its current cost.
The method that will tend to smooth out erratic changes in costs.
The method that will cause the company to have the lowest income taxes.
The method that can only be used if each inventory item can be matched with a specific purchase and its invoice.
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