7.02- Inventory Costing Methods Flashcards
What are the four types of INVENTORY COSTING METHODS?
- Specific Identification
- FIFO
- LIFO
- Weighted Average
What is SPECIFIC IDENTIFICATION?
An inventory method in which each inventory item is accounted for individually.
When is SPECIFIC IDENTIFICATION used as an INVENTORY COSTING METHOD?
When inventory is small, expensive, and clearly identified.
- Heterogeneous items
What is FIFO?
First in, First out
What is FIFO most closely related to?
Actual physical flow of goods
Under which method are Perpetual and Periodic inventory the same?
FIFO
What is LIFO?
Last in, first out
What is LIFO most closely related to?
Flow of cash
The idea that a company that wishes to “remain a going concern must maintain a basic level of investment in assets” is called what? What is this concept the basis of?
- Capital maintenance concept
- LIFO
What is the LIFO CONFORMITY RULE?
If LIFO is used for tax purposes, it must also be used for FINANCIAL REPORTING PURPOSES.
Under which method is the Income Statement okay, and the balance sheet is off?
LIFO
Under what method is the balance sheet okay, and the income statement is off?
FIFO
Under which method is the ending inventory UNDERSTATED?
LIFO
Under which method are Cost of Goods sold UNDERSTATED?
FIFO
What are the two types o AVERAGE INVENTORY METHODS?
- Moving Average (Perpetual)
- Weighted Average (Periodic)
