## Company’s inventory valuation

Question 1:
Proficient: Explain” rel=”nofollow”>in why proper in” rel=”nofollow”>inventory valuation is so important to the calculation of a company’s “bottom lin” rel=”nofollow”>ine” net in” rel=”nofollow”>income. What is the meanin” rel=”nofollow”>ing of takin” rel=”nofollow”>ing a physical in” rel=”nofollow”>inventory and why is it important to take a physical in” rel=”nofollow”>inventory when usin” rel=”nofollow”>ing a perpetual in” rel=”nofollow”>inventory system. Distin” rel=”nofollow”>inguished: Explain” rel=”nofollow”>in the accountant’s role regardin” rel=”nofollow”>ing takin” rel=”nofollow”>ing a physical in” rel=”nofollow”>inventory.
Question 2:
Proficient: What is the cost flow assumption? What is meant by the physical flow of goods? What relationship exists between cost flows and the physical flow of goods in” rel=”nofollow”>in a company? Distin” rel=”nofollow”>inguished: To place the proper valuation on in” rel=”nofollow”>inventory, a busin” rel=”nofollow”>iness must determin” rel=”nofollow”>ine which costs should be in” rel=”nofollow”>included in” rel=”nofollow”>in in” rel=”nofollow”>inventory cost. Gettin” rel=”nofollow”>ing goods ready to sell should in” rel=”nofollow”>include what items?
Question 3:
Proficient: Identify and describe each of the four most commonly used in” rel=”nofollow”>inventory valuation methods. What are the main” rel=”nofollow”>in advantages of each method? Distin” rel=”nofollow”>inguished: Identify the main” rel=”nofollow”>in disadvantages of each in” rel=”nofollow”>inventory valuation method.
Question 4:
Proficient: If in” rel=”nofollow”>inventory is bein” rel=”nofollow”>ing valued at cost and the price level is steadily risin” rel=”nofollow”>ing, which of the followin” rel=”nofollow”>ing three methods of costin” rel=”nofollow”>ing—FIFO, LIFO, or weighted average cost—will yield the lowest annual after tax net in” rel=”nofollow”>income? Which method will yield the highest after tax net in” rel=”nofollow”>income in” rel=”nofollow”>in a scenario where the price level is steadily declin” rel=”nofollow”>inin” rel=”nofollow”>ing? Distin” rel=”nofollow”>inguished: Which of the three methods of in” rel=”nofollow”>inventory will in” rel=”nofollow”>in general yield an in” rel=”nofollow”>inventory cost most nearly approximatin” rel=”nofollow”>ing current replacement cost?