10th Generation Electronics had two transformers in its inventory, one purchased in February for $11,800 and the other acquired in September for $13,300. In December, they sold one of the transformers to Ram Enterprises for $16,400 and reported a gross profit of $3,100. 10th Generation Electronics evidently uses the inventory valuation method.
A)FIFO
B)LIFO
C)Average
D)Flexplus

Question

Quizplus · Accepted Answer

Since the company reported a gross profit of $3,100 and sold the more expensive transformer, it indicates that they used the LIFO (Last in, First Out) method of inventory valuation. This means that they assumed that the more recently acquired transformer was sold first, which was the more expensive one purchased in September.

10th Generation Electronics Had Two Transformers in Its Inventory, One