In a period of declining prices, which of the following inventory cost formulas generally results in the lowest inventory figure on the statement of financial position?
A)Average cost
B)FIFO
C)The figure would be the same under both FIFO and average cost
D)Need more information to answer

Question

Quizplus · Accepted Answer

In a period of declining prices, the FIFO method generally results in the lowest inventory figure on the statement of financial position because the oldest (and likely the most expensive) inventory is sold first, resulting in a lower cost of goods sold and therefore a lower inventory value. The average cost method takes into account the average cost of all inventory items, so it may not reflect as much of a decrease in prices as the FIFO method.

In a Period of Declining Prices, Which of the Following