Jamison Corporation's inventory cost on its statement of financial position was lower using first-in, first-out than last-in, first-out. Assuming no beginning inventory, what direction did the cost of purchases move during the period?
A) Up
B) Down
C) Steady
D) Cannot be determined

Question

Quizplus · Accepted Answer

Since the inventory cost was lower using first-in, first-out, it means that the cost of goods sold was higher and there was a lower ending inventory. This indicates that the cost of purchases during the period increased, hence moving upwards.

Jamison Corporation's Inventory Cost on Its Statement of Financial Position