Question

The inventory valuation method that has the advantages of assigning an amount to inventory on the balance sheet that approximates its current cost, and also mimics the actual flow of goods for most businesses is:
A) FIFO
B) Weighted average
C) LIFO
D) Specific identification
E) All of these

Answer 1

Answer:

A. FIFO

Explanation:

FIFO, which is First-in, First-Out is a method used for calculating the cost of goods sold whereby the oldest goods in the company's or organization's industry are assumed to be sold first. It gives thesame results under both the periodic system and perpetual inventory system. So, in FIFO, goods acquired first are sold, leaving the most recent cost in the balance sheet. It also costs actual flow of goods in most businesses.