During inflationary periods, the value of inventory that appears on the balance sheet using FIFO method will be more than its current replacement cost.

Question

Quizplus · Accepted Answer

During inflationary periods, the FIFO (First In, First Out) method results in the oldest costs being allocated to the cost of goods sold, leaving the most recent, higher costs in inventory. Therefore, the value of inventory on the balance sheet will be closer to current replacement cost or possibly even higher, not less.

During Inflationary Periods, the Value of Inventory That Appears on the Balance