If inventory costs remain relatively constant from period to period, which inventory method is the most appropriate one in the allocation of cost flow between COGS and inventory carrying value?
I. Specific identification method.
II. FIFO.
III. Weighted average method.
IV. LIFO.
I am stuck with given choices.. I think its not I and for other three choices as per my understandings if prices are contant, it does nt make any difference if you choose II, III or IV as they all give same results. Please elaborate if you have some good explanation作者: Walex 时间: 2011-9-18 04:59
That is a good one. I would say weighted avg because the words 'relatively constant' were used and the weighted avg method would also keep COGS relatively constant.作者: Colum 时间: 2011-9-18 05:15
I would think the answer is FIFO for a couple of reasons. You can strike I and IV pretty easily. Specific ID doesn't make sense given the question and I would be hesitant to put LIFO because it isn't allowed under IFRS (I know the question doesn't specifically say it, but still).
I think that CFAI loves FIFO, unless you have a good reason to choose another way. It also matches ending inventory closest to replacement value.
Edited 1 time(s). Last edit at Thursday, August 25, 2011 at 10:25AM by krazykanuck.作者: pennyless 时间: 2011-9-18 05:31
misswallstreet Wrote:
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> That is a good one. I would say weighted avg
> because the words 'relatively constant' were used
> and the weighted avg method would also keep COGS
> relatively constant.
+1作者: sabaruch 时间: 2011-9-18 05:46
I think its FIFO作者: AnalystForum 时间: 2011-9-18 06:02
If inventory costs remains relatively constant, then it's weighted avg method.
If not, then you use the method that will allocate the most recent cost to COGS, which is LIFO for Income Statement which will allocate most recent cost to COGS & FIFO for Balance Sheet which will allocate the most cost to ending Inventory.作者: Dapper425 时间: 2011-9-18 06:18
FIFO kiddos, closest to reality作者: ryanlb 时间: 2011-9-18 06:34
While they'll all give you the same COGS, FIFO prices the remaining inventory with the most current prices.作者: OmarAdnan 时间: 2011-9-18 06:50
Question regarding the valuation allowance for inventory P.393 in book 3
1.How does the a company derive with the figure in that account?
2.Is it an account listed on the balance sheet?
3.When Mark down does occure, is it expensed then shifted into the account?
4.How does the process work?
Im a little confused with regards to this part of inventory, any help would be much appreciated.作者: noel 时间: 2011-9-18 07:22
1BigStud - I think you mean FIFO makes the balance sheet closest to reality (but distorts cogs on the income statement.) LIFO is the "closest to reality" when looking at COGS.
FIFO won't distort COGS if costs are stable, which is what is said in this question.
turbolt Wrote:
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> 1BigStud - I think you mean FIFO makes the balance
> sheet closest to reality (but distorts cogs on the
> income statement.) LIFO is the "closest to
> reality" when looking at COGS.作者: redskins44 时间: 2011-9-18 07:53
Regarding the first question: Specific identification method. Isn't it the most precise method of the cost flow allocation?作者: Roflnadal 时间: 2011-9-18 08:09
You are correct. But that method is unrealistic. But that could make a good "trick" question.
Deimon Wrote:
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> Regarding the first question: Specific
> identification method. Isn't it the most precise
> method of the cost flow allocation?
