225
LEARNING OUTCOMES
1
Determine the value of inventory using the
specific identification method under the perpetual
inventory system
2
Determine the value of inventory using the first-
in, first-out (FIFO) method under the perpetual
inventory system
3
Determine the value of inventory using the
weighted-average cost method under the
perpetual inventory system
4
Explain the impact of inventory errors
5
Apply the lower of cost and net realizable value
(LCNRV) rule to value inventory
6
Estimate the value of inventory using the gross
profit method under the periodic inventory
system
7
Estimate the value of inventory using the retail
method under the periodic inventory system
8
Measure a company's management of inventory
using inventory ratios
9
Describe ethics relating to inventory
Appendix
10
Determine the value of inventory using the
specific identification method under the periodic
inventory system
11
Determine the value of inventory using the first-
in, first-out (FIFO) method under the periodic
inventory system
12
Determine the value of inventory using the
weighted-average cost method under the periodic
inventory system
Chapter 8
INVENTORY VALUATION
Inventory Valuation Methods
In the previous chapter, we saw how merchandising businesses account for various transactions
involving inventory. A perpetual inventory system updates the inventory and cost of goods
sold accounts after every sales transaction. This is straightforward when identical inventory was
purchased for the same price, but prices for identical goods often fluctuate.This can make it difficult
to calculate the COGS for a particular sale.
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