Which of the following statements is correct with respect to inventories?
A) The FIFO cost formula assumes that the costs of the earliest goods acquired are the last to be sold.
B) It is generally good business management to sell the most recently acquired goods first.
C) Under FIFO, the ending inventory is based on the latest units purchased.
D) FIFO seldom coincides with the actual physical flow of inventory.

Question

Quizplus · Accepted Answer

Under the FIFO (First-In, First-Out) cost formula, the costs of the earliest goods acquired are the first to be recognized as cost of goods sold, leaving the costs of the latest goods purchased in the ending inventory. This reflects the assumption that the first goods purchased are the first goods sold.

Which of the Following Statements Is Correct with Respect to Inventories