Explain how to estimate the average cost of inventory when using the retail inventory method.

Q: Identify the costs of merchandise inventory.

A: Merchandise Inventory: Merchandise is the stock of goods bought by a wholesaler, or a retailer, or a…

Q: Under what circumstances is the relative sales value an appropriate basis for determining the price…

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Q: Explain the LIFO retail inventory method.

A: LIFO: Under this inventory method, the units that are purchased last, are sold first. Thus, it…

Q: What is inventory turnover Ratio? Explain its significance.

A: Explain the meaning of inventory turnover ratio and its significance:Inventory turnover ratio:…

Q: Under what circumstances would a company need to estimate its inventory? What are the differences…

A: The worth of the items in your inventory at the time of your most recent physical count is the…

Q: Under what circumstances would the gross profit method of estimating inventory be used?

A: The gross profit method of estimating inventory is typically used in situations where a company…

Q: What is inventory shrinkage? Describe the adjusting entry that would be recorded to account for…

A: Inventory shrinkage: When there is a difference between inventory as per books and actual inventory…

Q: The factor which determines whether or not goods should be included in a physical count of inventory…

A: The inventory is an asset for the business. The inventory is reported as a current asset in the…

Q: Explain which physical units of goods should be included in inventory.

A: Inventory:   It refers to an accounting term used to describe the goods in various stages in the…

Q: How do you calculate inventory turnover ratio

A: Inventory turnover ratio indicates how fast a firm converting its inventory into the cost of goods…

Q: What does the cost of merchandise inventory includes?

A: Merchandise Inventory: Merchandise is the stock of goods bought by a wholesaler, or a retailer, or a…

Q: Describe a  Comparison of the Perpetual and Periodic Inventory Systems

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Q: What is Included in Inventory?

A: Inventory is the assets available for sale and used in process of production of such assets for sale…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.