Example this type of inventory method is typically

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Example: This type of inventory method is typically used by large retailers and car dealerships because it helps to manage the income tax payments by keeping them lower as the cost to purchase these productsis assumed to increase over time. Weighted-Average The weighted-average method of inventory costing is a means of determining the cost of the ending inventory based on the average unit cost. Companies most often use this method to determine a cost forunits that are essentially the same. For example, a toy store with several units of the same exact games in its inventory, etc. Since the units are alike, companies can assign the same cost to each unit. The
weighted-average cost per unit is determined by dividing the costs of goods purchased by the number ofunits (Miller-Nobles, Mattison, & Matsumura, 2018).How are financial statements affected by using the four different methods?The financial statements can be affected depending on the company and what products are being sold, depending on product type and the number of products sold they can all weigh differently when calculated. The main changes are seen with the cost of goods sold and the overall gross profit for the company.Financial statements, such as income statements and balance sheets, are directly affected by these methods. According to our text, when inventory costs are rising, FIFO results in the lowest cost of goods sold, highest gross profit, and highest net income. Using LIFO results in the highest cost of goods sold and lowest gross profit, which then lowers the taxable income and impacts the income taxes during that period of time. The outcome of the weighted-average generally falls between the extremes of FIFO and LIFO and is considered to be the “middle-ground” approach according to out textbook. The specific identification method tends to produce more varied results (amounts) because the cost of goods sold is based upon the actual cost assigned to the inventory item (Miller-Nobles, Mattison, Matsumura, 2018)ReferencesMiller-Nobles, T. L., Mattison, B. L., & Matsumura, E. M. (2018).Horngren’s accounting(12th ed.). Retrieved from

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