What inventory valuation method does IQ use?
Information cited from: Investopedia
Answer:
IQ uses the First-In First-Out Method (FIFO).
What Is the FIFO Method?
FIFO means "First In, First Out." It's an asset management and valuation method in which older inventory is moved out before new inventory comes in. The first goods to be sold are the first goods purchased.
FIFO assumes that assets with the oldest costs are included in the income statement's Cost of Goods Sold (COGS). The remaining inventory assets are matched to assets that were most recently purchased or produced.
The FIFO method avoids obsolescence by selling the oldest inventory items first and maintaining the newest items in inventory. The actual inventory valuation method used doesn't have to follow the actual flow of inventory through a company but it must be able to support why it selected the inventory valuation method.
Example for First-In First-Out Method (FIFO):
First in, first out means exactly what it says. The first apple you bring into inventory will be the first one sold as product. First in, first out, or FIFO, as it is commonly referred to, is based on the principle that most
businesses tend to sell the first goods that come into inventory.
Suppose you buy five apples at 10 each on January 3 and purchase another five apples at 20 each on
January 7. You then sell five apples on January 30. Using first-in, first out, the five apples you purchased at
10 would be sold first. This would lefirst-outave you with the five apples that you purchased at 20, which would
leave the value of your inventory at 100