Acc 205 week 3 discussion 2.docx - Explain the four...

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Explain the four merchandise inventory methods and provide an example for each . Our text says that there are four different methods to determine the cost of inventory. The four methods are specific identification, first-in, first-out (FIFO), last-in, first-out (LIFO), and weighted average costs. Specific Identification: Uses the specific cost of each unit of inventory to determine the ending inventory and cost of goods sold. (Miller-Nobles, Mattison, & Matsumura 2018) This method is normally used by companies that sell specific items such as cars or jewelry. (Miller-Nobles, Mattison, & Matsumura 2018) First-in, first-out (FIFO): This method is the cost of goods sold is based on the oldest purchases-that is, the first units to come in are assumed to be the first units to go out. (Miller- Nobles, Mattison, & Matsumura 2018) (Miller-Nobles, Mattison, & Matsumura 2018) Last-in, first-out (LIFO): This is the opposite of FIFO. Under the LIFO method, ending inventory comes from the oldest costs (beginning inventory and earliest purchases) of the period.

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