Asked by Jonathan Philley on May 10, 2024
Verified
An advantage of the FIFO method is that:
A) the figure for ending inventory is made up of current costs on the income statement.
B) the cost flow tends to follow the physical flow.
C) it matches current selling prices and current costs.
D) Both A and B are correct.
FIFO Method
"First-In, First-Out", an inventory valuation method where goods first added to inventory are the first ones considered sold.
Ending Inventory
The total value of goods available for sale at the end of an accounting period.
Income Statement
A financial statement that shows a company's revenues, expenses, and profit or loss over a specific period.
- Absorb the principles of different inventory valuation techniques, including FIFO, LIFO, Specific Invoice, and Weighted-average.
- Distinguish the advantages and disadvantages of different inventory valuation methods.
Verified Answer
SP
Sudip PandeyMay 15, 2024
Final Answer :
B
Explanation :
The FIFO (First-In, First-Out) method assumes that the first items purchased are the first ones sold, which often aligns with the actual physical flow of goods in many inventory systems, making option B correct.
Learning Objectives
- Absorb the principles of different inventory valuation techniques, including FIFO, LIFO, Specific Invoice, and Weighted-average.
- Distinguish the advantages and disadvantages of different inventory valuation methods.
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