Inventory valuation is used to calculate the cost of goods sold and cost of ending inventory. The most widely used methods are LIFO, FIFO and average cost method. You are required to find out the inventory system applied, the method of inventory valuation used, and what does inventory consists of with their respective amount? How Inventory Method Affects Income Statement & Balance SheetPurchaseUnitsPrice$1,0001st Inventory Batch2nd Inventory Batch3rd Inventory Batch$1,000$1,000$1,050$1,100$1,150$4,300$1,0004th Inventory BatchTotal Inventory$1,000$4,000Average Cost per 1,000 Units$1,075AverageCost$1,500LIFOFIFOSales (1,000 units @ $1.50)$1,500$1,150$350$1,500$1,075$425$1,000$500COGSGross ProfitStarting Inventory Value$4,300$4,300$4,300- COGS$1,075$3,225$1,150$1,000$3,300Ending Inventory Value$3,150

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Description: Inventory valuation is used to calculate the cost of goods sold and cost of ending inventory. The most widely used methods are LIFO, FIFO and average cost method. You are required to find out the inventory system applied, the method of inventory valu

First in First out Method This is one of the popular method of inventory valuation. While using…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Inventory valuation is used to calculate the cost of goods sold and cost of ending inventory. The most widely used methods are LIFO, FIFO and average cost method. You are required to find out the inventory system applied, the method of inventory valuation used, and what does inventory consists of with their respective amount?

How Inventory Method Affects Income Statement & Balance Sheet
Purchase
Units
Price
$1,000
1st Inventory Batch
2nd Inventory Batch
3rd Inventory Batch
$1,000
$1,000
$1,050
$1,100
$1,150
$4,300
$1,000
4th Inventory Batch
Total Inventory
$1,000
$4,000
Average Cost per 1,000 Units
$1,075
Average
Cost
$1,500
LIFO
FIFO
Sales (1,000 units @ $1.50)
$1,500
$1,150
$350
$1,500
$1,075
$425
$1,000
$500
COGS
Gross Profit
Starting Inventory Value
$4,300
$4,300
$4,300
- COGS
$1,075
$3,225
$1,150
$1,000
$3,300
Ending Inventory Value
$3,150

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