Which inventory costing method most closely approximates current cost for each of the following line items on the financial statements?
A) $$\begin{array} { | c | c | }
\hline \text { Ending Inventory } & \text { Cost of Goods Sold } \
\hline \text { FIFO } & \text { FIFO } \
\hline
\end{array}$$
B) $$\begin{array} { | c | c | }
\hline \text { Ending Inventory } & \text { Cost of Goods Sold } \
\hline \text { LIFO } & \text { LIFO } \
\hline
\end{array}$$
C) $$\begin{array} { | c | c | }
\hline \text { Ending Inventory } & \text { Cost of Goods Sold } \
\hline \text { FIFO } & \text { LIFO } \
\hline
\end{array}$$
D) $$\begin{array} { | c | c | }
\hline \text { Ending Inventory } & \text { Cost of Goods Sold } \
\hline \text { LIFO } & \text { FIFO } \
\hline
\end{array}$$

Question

Which inventory costing method most closely approximates current cost for each of the following line items on the financial statements?
A) $$\begin{array} { | c | c | } 
\hline \text { Ending Inventory } & \text { Cost of Goods Sold } \
\hline \text { FIFO } & \text { FIFO } \
\hline
\end{array}$$
B) $$\begin{array} { | c | c | } 
\hline \text { Ending Inventory } & \text { Cost of Goods Sold } \
\hline \text { LIFO } & \text { LIFO } \
\hline
\end{array}$$
C) $$\begin{array} { | c | c | } 
\hline \text { Ending Inventory } & \text { Cost of Goods Sold } \
\hline \text { FIFO } & \text { LIFO } \
\hline
\end{array}$$
D) $$\begin{array} { | c | c | } 
\hline \text { Ending Inventory } & \text { Cost of Goods Sold } \
\hline \text { LIFO } & \text { FIFO } \
\hline
\end{array}$$

Quizplus · Accepted Answer

FIFO approximates current cost for ending inventory because it assumes the oldest costs are used first, leaving the most recent costs in inventory. LIFO approximates current cost for cost of goods sold because it assumes the most recent costs are used first, reflecting current costs in COGS.

Which Inventory Costing Method Most Closely Approximates Current Cost for Each