In periods of rising prices the inventory method which results in the inventory value on the balance sheet that is closest to current cost is the
A) FIFO method.
B) LIFO method.
C) average-cost method.
D) tax method.

Question

Quizplus · Accepted Answer

FIFO method assumes that the first items purchased are the first items sold. As a result, during periods of rising prices, the cost of goods sold will be based on older, lower-priced inventory, while the inventory on the balance sheet will reflect current, higher-priced inventory. This results in a more accurate representation of the company's current assets and their true value. Therefore, A) FIFO method is the best choice in this scenario.

In Periods of Rising Prices the Inventory Method Which Results