Difficulty: Medium

Average Score: 69%

What is the ending inventory and cost of goods sold for the year ended December 31, 2018, using the specific identification method?

Diagram for question

Rationale

Ending inventory = $65,500, and cost of goods sold = $227,000.

Using the specific identification method, the ending inventory and cost of goods sold are calculated based on the actual cost of each item sold and remaining in stock. This method accurately reflects the true costs associated with the products sold during the accounting period, leading to the correct values.

A (Ending inventory = $61,000, and cost of goods sold = $231,500) YOUR ANSWER

This choice indicates an ending inventory that is too low and a cost of goods sold that is too high. The specific identification method would not result in such a discrepancy, as it accounts for the actual costs of the items rather than using averages or estimates.

B (Ending inventory = $65,500, and cost of goods sold = $227,000) CORRECT

This correct choice reflects the accurate calculation of the ending inventory and cost of goods sold based on the specific identification method. This method ensures that the reported values align with the actual costs incurred for the items sold during the year.

C (Ending inventory = $68,500, and cost of goods sold = $224,000) YOUR ANSWER

This option presents a higher ending inventory, which suggests that fewer items were sold than accounted for. The cost of goods sold is also lower than expected for the sales made, indicating an incorrect application of the specific identification method.

D (Ending inventory = $65,000, and cost of goods sold = $227,500) YOUR ANSWER

While the cost of goods sold here is close, the ending inventory is inaccurately low. This choice does not accurately reflect the itemized costs associated with the remaining inventory as per the specific identification method.

Conclusion

The specific identification method provides a clear and precise calculation of ending inventory and cost of goods sold based on actual costs. For the year ending December 31, 2018, the values of $65,500 for ending inventory and $227,000 for cost of goods sold accurately reflect the costs incurred for each item sold, distinguishing it from the other options that do not align with this method.

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