Which cost-based inventory valuation system is most useful to a user trying to predict future cash flows?
A)FIFO
B)LIFO
C)Average cost
D)Specific identifications

Question

Quizplus · Accepted Answer

FIFO (First-in, First-out) assumes that the first items purchased or produced are the first ones sold or used, which results in inventory being valued at the most recent or current cost. This can be useful in predicting future cash flows because it provides a more accurate representation of the cost of goods sold and the value of ending inventory. This, in turn, can assist in forecasting future cash inflows and outflows related to inventory purchases and sales.

Which Cost-Based Inventory Valuation System Is Most Useful to a User