Specific identification is most appropriate for inventory consisting of:
Correct answer: C. Unique items held for particular customer contracts
- A. Large quantities of identical low-value items
- B. Interchangeable units purchased throughout the year
- C. Unique items held for particular customer contracts
- D. Routine office supplies with frequent usage
Explanation
Specific identification assigns the actual cost to each identifiable item, making it suitable for unique or separately designated goods. It is less practical for large quantities of interchangeable items because individual tracking would be difficult.
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About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
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