ACC205 Week 3 Discussion 2.docx - ACC205 Week 3 Discussion...

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ACC205 Week 3 Discussion 2 Explain the four merchandise inventory methods and provide an example for each Four accepted methods of inventory are 1) specific identification; 2) first-in, first-out; 30 last-in, first out; 4) weighted average. Specific identification: According to our text, “the specific identification method uses the specific cost of each unit of inventory to determine ending inventory and cost of goods sold. This gives the company the ability to know exactly which item was sold and how much that item cost” (Miller-Noble, Mattison, Matsumura, 2018, pg. 327). Date Units purchased Units sold Balance Aug. 1 1,000 units @ $2.00 1,000 units Aug. 12 3,000 units @ $2.20 4,000 units Aug. 17 2,000 units 2,000 units Aug. 30 1,000 units @ $2.40 3,000 units First-In, First-Out: The cost of goods purchased first (first-in) is the cost of goods sold first (first- out). In our text, “Under the first-in, first-out (FIFO) method, 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 (sold)” (Miller-Noble, Mattison, Matsumura, 2018, pg. 328).

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