The acquisition cost of a certain raw material changes frequently. The book value of the inventory of this material at year end will be the same if perpetual records are kept as it would be under a periodic inventory method only if the book value is computed under the
A) weighted-average method.
B) moving average method.
C) LIFO method.
D) FIFO method.

Question

Quizplus · Accepted Answer

The FIFO method assumes that the first units purchased are the first sold, and the ending inventory is valued at the most recent cost. This method results in a more accurate representation of inventory value in a period of fluctuating prices. Therefore, if perpetual records are kept, using the FIFO method will result in the same book value of inventory at year end as under the periodic inventory method.

The Acquisition Cost of a Certain Raw Material Changes Frequently