Concept explainers
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.

Want to see the full answer?
Check out a sample textbook solution
Chapter 5 Solutions
FINAN&MANAGERIAL ACCT (LL)W/1TERM ACCESS
- What is the inventory turnover ratio?arrow_forwardCan you help me with accounting questionsarrow_forwardOn January 1, Park Corporation and Strand Corporation had condensed balance sheets as follows: Items Current assets Noncurrent assets Total assets Current liabilities Long-term debt Stockholders' equity Total liabilities and equities Park $ 70,000 90,000 Strand $ 20,000 40,000 $ 60,000 $ 160,000 $ 30,000 $ 10,000 50,000 Ө 80,000 50,000 $ 160,000 $ 60,000 On January 2, Park borrowed $60,000 and used the proceeds to obtain 80 percent of the outstanding common shares of Strand. The acquisition price was considered proportionate to Strand's total fair value. The $60,000 debt is payable in 10 equal annual principal payments, plus interest, beginning December 31. The excess fair value of the investment over the underlying book value of the acquired net assets is allocated to inventory (60 percent) and to goodwill (40 percent). Required: On a consolidated balance sheet as of January 2, calculate the amounts for each of the following: a. Current assets b. Noncurrent assets c. Current…arrow_forward
- Direct materials used totaled $65,750; direct labor incurred totaled $199,400; manufacturing overhead totaled $344,800; Work in Process Inventory on January 1, 2004, was $186,100; and Work in Process Inventory on December 31, 2004, was $191,600. What is the cost of goods manufactured for the year ended December 31, 2004? Right Answerarrow_forwardOperating leveragearrow_forwardThe actual price per pound of direct materials purchased in November is?arrow_forward
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education





