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Inventory is accounted for at cost. After a company has determined the quantity of units of inventory, it applies unit costs to the quantities to determine the total cost of inventory and the cost of goods sold. Which of the following statements is not a method for computing the cost of inventory?

a. First-in, first-out
b. Average-cost
c. Last-in, first-out
d. Allowance estimation
e. Specific identification

Respuesta :

Answer:

Option D is the correct answer.

Explanation:

  • First-in, first-out method is when you use the cost of the inventory you bought at the beginning of the year and multiply it with sales to determine cost of inventory that you have sold. Any remaining inventory from when you bought it for the first time at the cost that you paid at the time when you bought it is used. Usually grocery shops use this method.
  • Average cost method is when you take an average of the costs of the inventory you bought and then multiply that cost with the number of inventory sold.
  • Last-in, first-out method is when you use the cost of the inventory you recently bought and multiply it with number of inventory sold to determine cost of inventory that you have sold.
  • Specific Identification method is used on inventory that is sold infrequently such as gold.

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