Find the inventory values using (a) the weighted-average method, (b) the FIFO method, and (c) the LIFO method. Round final answers to the nearest dollar.
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A)a)$5,907 b)$2,850 c)$1,932
B)a)$2,274 b)$2,158 c)$2,261
C)a)$2,274 b)$2,261 c)$2,158
D)a)$5,907 b)$2,627 c)$1,716

Question

Find the inventory values using (a) the weighted-average method, (b) the FIFO method, and (c) the LIFO method. Round final answers to the nearest dollar.
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A)a)$5,907 b)$2,850 c)$1,932 
B)a)$2,274 b)$2,158 c)$2,261 
C)a)$2,274 b)$2,261 c)$2,158 
D)a)$5,907 b)$2,627 c)$1,716

Quizplus · Accepted Answer

The inventory values using the FIFO and LIFO methods are very close to each other, indicating that the company has had a fairly stable cost of goods sold and inventory over time. The weighted-average method results in a significantly higher inventory value, which may not accurately represent the cost of the inventory on hand. Therefore, the best choice is to use the FIFO or LIFO method. Between the two, the LIFO method may be a better choice as it results in a lower inventory value, which can lead to tax savings. The LIFO method results in the lowest inventory valuation because the most recent (and thus, most expensive) units are assumed to be sold first. This is not a good choice for a company that wants to show higher net income, as it results in a higher cost of goods sold and lower net income. 
The weighted-average method calculates an average cost per unit based on the total cost of goods available for sale divided by the total number of units available for sale. This method is a good choice if the company has a mix of old and new inventory, as it takes into account the total cost of goods available for sale. 
The FIFO method assumes that the first units purchased are the first units sold, resulting in a higher inventory valuation because the older (and thus, less expensive) units are assumed to be sold first. This method is a good choice for a company that wants to show a higher net income, as it results in a lower cost of goods sold and higher net income. 
Based on this, the best choice is the weighted-average method, as it takes into account the total cost of goods available for sale and provides a more accurate valuation of the inventory.

Find the Inventory Values Using (A) the Weighted-Average Method, (B)