"Financial Report":Inventory valuation method

C is correct. Specific identification best matches the physical flow of the inventory items because it tracks the actual units that are sold.

A is incorrect. LIFO is based on cost flow assumptions but does not necessarily match the actual physical movement of the goods.

B is incorrect. FIFO is based on cost flow assumptions but does not necessarily match the actual physical movement of the goods.

A is correct. The company experienced a large buildup of finished goods (38% increase) and a decline in both raw materials (–11.3%) and work in process (–4.0%). This scenario suggests a decline in demand for the company’s products and a strong likelihood of future write-downs. Supplies grew by less than 2.0%, but sales increased by less than 5.0%, so it is unlikely that the price of supplies increased significantly.

B is incorrect. Supplies have grown by less than 2.0%, but sales have increased by just under 5.0%, so it is unlikely that there has been a significant increase in the price of supplies.

C is incorrect. There is a large buildup of finished goods (38% increase) and a decline in both raw materials (–11.3%) and work in process (–4.0%). This suggests a decline in demand for the firm’s products.