Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Inventory Errors

Financial Accounting

5. Inventory

Inventory Errors

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Multiple Choice

Rotating stock so that the oldest items move first is often referred to as:

First-In, First-Out (FIFO)

Last-In, First-Out (LIFO)

Weighted Average Method

Specific Identification Method

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Verified step by step guidance

Understand the concept of inventory management methods: In financial accounting, inventory management methods determine how costs are assigned to inventory and cost of goods sold. The methods listed in the problem are common approaches.

Define First-In, First-Out (FIFO): FIFO assumes that the oldest inventory items are sold first. This method is often used when inventory items are perishable or have expiration dates, ensuring that older stock is used or sold before newer stock.

Define Last-In, First-Out (LIFO): LIFO assumes that the most recently acquired inventory items are sold first. This method is less common and is typically used in industries where inventory costs are rising, as it can reduce taxable income.

Define Weighted Average Method: This method calculates the average cost of all inventory items and assigns this average cost to both inventory and cost of goods sold. It is useful when inventory items are indistinguishable or interchangeable.

Define Specific Identification Method: This method tracks the cost of each individual inventory item and assigns it directly to cost of goods sold when the item is sold. It is often used for high-value or unique items.