Which inventory valuation methods are acceptable at year-end?

The correct answer highlights acceptable inventory valuation methods at year-end, specifically naming weighted average, the retail method, and specific identification.

Weighted average costing is widely used because it smooths out price fluctuations by averaging costs over a period, making it particularly useful in industries where inventory items are indistinguishable or where items are interchangeable. This method is suitable for financial reporting as it gives a consistent measure of inventory cost and impacts profit appropriately.

The retail method is advantageous for businesses that have a large volume of inventory with fluctuating prices, as it allows for efficient estimation of inventory value based on the relationship between the cost of goods and the retail value. This method is especially helpful in retail environments where continuous tracking of inventory costs might be impractical.

Specific identification is a precise method that tracks the actual cost of individual items. It is most suitable for businesses dealing in unique or high-value items, such as automobiles or art collections. This method provides the most accurate representation of inventory costs, ensuring that financial statements reflect the true value of goods remaining on hand.

These methods are recognized under Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS), aligning with best practices for accurate financial reporting.

In contrast, while FIFO is a widely accepted method,