In a period of falling prices which inventory method generally provides the lowest reported inventory?
A) Average cost.
B) FIFO.
C) Moving average.
D) Specific identification.

Question

Quizplus · Accepted Answer

In a period of falling prices, the FIFO (First-In, First-Out) method generally provides the lowest reported inventory. This is because the oldest (and typically cheapest) units are assumed to have been sold first, leaving the most recent (and typically more expensive) units in inventory. As a result, the cost of goods sold (COGS) is based on the higher-priced units, while the lower-priced units remain in inventory.

In a Period of Falling Prices Which Inventory Method Generally