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We have arrived at the final unit before the final exam of BUT102, Basic Accounting.
In Unit 5, we explored special accounting considerations for merchants. One of these
considerations was stock or inventory. In Unit 8 we study inventory in much greater
detail.
For many firms, from small shops to global distributors, inventory is the largest asset
on the balance sheet. Because it is such an important asset, there must be a sound
method for assigning a value to it, and because not all firms operate in exactly the
same way, there are several valuation methods to choose from.
For this discussion, let us return to our favorite local merchants from units 5 and 6.
What inventory valuation method would you advise them to use? Why do you think it
is the best suited to their business? Describe the valuation method you would use
(ex.FIFO or LIFO) and why. Describe how you would adjust the value of inventory by
applying the lower of cost or market technique.

Top Answer

lifo: lifo mean last in first out and company use these method for cost flow to improve the cost with sale. Fifo: Fifo meaans... View the full answer

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