The process of accurate inventory valuation is vital to an organization, because the reported value of a firm’s inventory will affect the cost of goods sold, gross profit, and net income on the income statement. In addition, the value of current assets, working capital, total assets, and stockholder’s or owner’s equity reported on the balance sheet will be impacted. Furthermore, an incorrect inventory valuation will cause 2 income statements to be recorded incorrectly, because the ending inventory of 1 accounting period becomes the beginning inventory in the ensuing accounting period.
Respond to the following in a minimum of 175 words:
· What are 4 factors that must be considered for accurate inventory valuation? Discuss your answer.
· Which of the 4 factors do you believe is most important? Why?
