Inventory is an important asset on the balance sheet and impacts the income statement through cost of goods sold. There are two main concerns with inventory valuation - revenue recognition and ending inventory valuation. Companies must count inventory quantities and value them at cost, with adjustments made if the lower of cost or market is below cost. Common inventory costing methods include specific identification, first-in first-out, last-in first-out, and average cost.

9. FIFO method assumes earliest goods purchased are the first to be sold

11. LIFO method assumes latest goods purchased are the first to be sold

13. Allocation of the cost of goods available for sale in average cost method is made on the basis of the weighted average unit cost

14. Average cost method assumes that goods available for sale are homogeneous

20. LCM - Product 55,000 45,000 100,000 45,000 14,000 59,000 159,000 Television Sets 166,000 168,000 Total Inventory 59,000 63,000 Total 14,000 15,000 Movies 45,000 48,000 Recorders Video Equipment 107,000 105,000 Total 52,000 45,000 HDTV 55,000 60,000 Standard Market Cost Valuation

21. LCM - Category 105,000 59,000 164,000 Television Sets 166,000 168,000 Total Inventory 59,000 63,000 Total 14,000 15,000 Movies 45,000 48,000 Recorders Video Equipment 107,000 105,000 Total 52,000 45,000 HDTV 55,000 60,000 Standard Market Cost Valuation

22. LCM – Total Inventory 166,000 Television Sets 166,000 168,000 Total Inventory 59,000 63,000 Total 14,000 15,000 Movies 45,000 48,000 Recorders Video Equipment 107,000 105,000 Total 52,000 45,000 HDTV 55,000 60,000 Standard Market Cost Valuation