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Match Each Situation Described Below to Inventory Valuation Method in All

Question 205

Matching

Match each situation described below to inventory valuation method In all cases, assume a period of rising prices.

Premises:
The method that can only be used if each inventory item can be matched with a specific purchase and its invoice
The method that will cause the company to have the lowest income taxes
The method that will cause the company to have the lowest cost of goods sold
The method that will assign a value to inventory that approximates its current cost
The method that will tend to smooth out erratic changes in costs.
Responses:
FIFO, First in, first out
LIFO,Last in, first out
SI,Specific identification
WA,Weighted average

Correct Answer:

The method that can only be used if each inventory item can be matched with a specific purchase and its invoice
The method that will cause the company to have the lowest income taxes
The method that will cause the company to have the lowest cost of goods sold
The method that will assign a value to inventory that approximates its current cost
The method that will tend to smooth out erratic changes in costs.
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