The FIFO method can result in misleading inventory costs on the balance sheet because the oldest prices are left in ending inventory.

Question

Quizplus · Accepted Answer

The FIFO (First-In, First-Out) method assumes that the oldest inventory items are sold first, so the ending inventory is valued at the most recent prices, not the oldest. This reflects a more current cost of inventory on the balance sheet.

The FIFO Method Can Result in Misleading Inventory Costs on the Balance