Which inventory cost flow method is not permitted under IAS 2?
Correct answer: D. Last-in, first-out method
- A. First-in, first-out method
- B. Weighted average cost method
- C. Specific identification method
- D. Last-in, first-out method
Explanation
IAS 2 permits methods such as FIFO and weighted average for ordinarily interchangeable items, but it does not permit LIFO. Specific identification is used for items that are not ordinarily interchangeable or for specific projects.
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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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More Inventory Valuation questions
Which inventory valuation method assumes that the earliest goods purchased are sold first?
Under IAS 2, inventories are generally measured at which amount?
During a period of rising prices, which method generally reports the highest closing inventory value?
A business has 100 units costing Rs. 10 each and 200 units costing Rs. 13 each. Under the weighted average cost method, the cost per unit is:
Net realisable value of inventory is best defined as:
A company buys 500 units at Rs. 20 each and 300 units at Rs. 24 each. If it sells 400 units and uses FIFO, the cost of goods sold is: