Under the specific identification method, ‘the estimation of the stock determined dependent on the precise distinguishing...

Under the specific identification method, ‘the estimation of the stock determined dependent on the precise distinguishing proof of things’ could you explain this in more detail.

Expert Solution

Specific Identification Method is a method used for valuation of inventory. It requires physically tracking each item in the inventory in details. The dealers of precious and rare goods use this method as it is not feasible for high volume retails products like clothing, stationary etc. as thousands of items in the inventory. This method gives more accurate numbers, since it is very useful in accounting. The figure exactly tells the totals cost of unsold goods in the inventory. So the estimation of stock determined dependent on precise distinguishing proof of things.

For example, if you are a high end furniture dealer and your business is custom-tailored. The product types must be sofas, tables and bed. At the end of accounting period it needs to count the items as specific identification method is used for valuation of inventory. You may have 5 sofas of $500 each, 0 tables of $250 each and 6 beds of $800 each.

To calculate the ending inventory

(5*500) + (0*250) + (6*800) =$7300

ekkarill92 answered 2 years ago

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