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

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Quizplus · Accepted Answer

When prices are increasing, the FIFO method assumes that the oldest inventory is sold first, leaving the newest inventory on hand. This results in the value of inventory on the balance sheet being closer to its current replacement cost. Therefore, during inflationary periods, the value of inventory that appears on the balance sheet using FIFO method will be same as its current replacement cost.

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