When valuing items in inventory for financial reporting purposes, generally accepted accounting principles (GAAP) requires firms to value the cost of goods sold by assuming that the items that have been in inventory the longest are the ones that are sold first.

Question

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GAAP permits businesses to select from a few different methods of inventory valuation, including FIFO (first-in, first-out) and LIFO (last-in, first-out).

When Valuing Items in Inventory for Financial Reporting Purposes, Generally