Question

The inventory valuation method that identifies each item in ending inventory with a specific purchase and invoice is the:

a. Weighted average inventory method.

b. First-in, first-out method.

c. Last-in, first-out method.

d. Specific identification method.

e. Retail inventory method.

Answer 1

d. Specific identification method.

Step-by-step explanation:

The specific indentification method relies on the specific categorization of the ending inventory, by attaching the date or purchase and the exact cost to every item of the ending inventory.

As it can be seen, the method is very accurate, because it can give the real value of ending inventory at the end of the year. However, it is also very time-consuming and difficult to keep up with, and for this reason most companies only use this method for items that are valuable, or that can be easily categorized in a specific date and price.

Most companies use other inventory valuation methods like LIFO, FIFO, and weighted average.