::: vuaskari.com ::: FIN621 GDB IDEA SOLUTION BY HONEY

ABC Limited deals in generators of different brands and capacity. The least expensive generator is priced at Rs. 500,000 and the most expensive generator cannot be sold for more than Rs. 5,000,000. The inventory of the generators consists of 20 generators and no two are alike. 
ABC Ltd also owned XYZ (Pvt) Ltd producing battery cells. ABC Ltd planned to issue IPO of XYZ (Pvt) Ltd. within next five years; therefore, focusing on maximizing the profitability of the company XYZ (Pvt) Ltd, which is also facing the challenge of rapid inflation." 

Required: Identify most appropriate inventory valuation method for Company ABC Ltd and Company XYZ (Pvt) Ltd along with stating a valid reason for choosing particular inventory valuation method in just one line.


ANSWER:
ABC Limited
METHOD: Specific Identification Method
REASON: It relates the ending inventory goods directly to the specific price they were bought for

XYZ (Private) Limited
METHOD: FIFO Method
Reason: FIFO method is suitable when prices are increase and economy facing inflation challenges.

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