Ace Company is a retailer operating in an industry that experiences inflation (rising prices).Ace wants the most realistic ending inventory.Which inventory costing method should Ace consider using?
A)Average-cost because all inventory costs will then represent an average amount.
B)Specific identification is the most realistic method because it involves the actual costs.
C)LIFO because ending inventory represents the earliest costs.
D)FIFO because ending inventory represents the latest costs.

Question

Quizplus · Accepted Answer

FIFO (First-In, First-Out) is the most realistic method in an inflationary environment because it assumes that the oldest inventory items are sold first, leaving the most recently acquired (and thus higher cost) items in ending inventory.

Ace Company Is a Retailer Operating in an Industry That