When Valuing Ending Inventory Under a Perpetual Inventory System, the

question 168

Multiple Choice

When valuing ending inventory under a perpetual inventory system, the

• A) valuation using Average is the same as the valuation using Average under the periodic inventory system.
• B) Average cost method requires that a new average unit cost be calculated after every sale.
• C) valuation using FIFO is the same as the valuation using FIFO under the periodic inventory system.
• D) most recent units purchased during the period using FIFO are allocated to the cost of goods sold when units are sold.

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Definitions:

Actual Inventory

The physical count of products or materials a company has available at a specific point in time.

Ending Inventory

Ending inventory is the value of goods still available for sale by a company at the end of an accounting period, calculated as the sum of the beginning inventory plus purchases minus cost of goods sold.

LIFO

"Last In, First Out," an inventory costing method where the most recently produced or acquired items are sold or used first, potentially reducing taxes during inflation.

FIFO

An inventory valuation method that assumes that the first items placed in inventory are the first sold, thus costs of the oldest inventory are used in the cost of goods sold calculation.