The first step in verifying the valuation of purchased inventory is in determining the valuation method used by the client. The next step is
A) determining that all inventory that is purchased is expensed through cost of goods sold.
B) determining which costs should be included in the valuation of an item of inventory.
C) determining that all inventory on hand reconciles to the perpetual inventory records.
D) determining that cut-off procedures have been adhered to prior to counting inventory.

Question

Quizplus · Accepted Answer

Once the valuation method used by the client is determined, the next step is to identify which costs should be included in the valuation of an item of inventory. This could include direct costs such as purchase cost, freight, and customs duty as well as indirect costs such as storage and handling costs. This step is crucial in ensuring that the inventory is valued accurately in the financial statements.

The First Step in Verifying the Valuation of Purchased Inventory