In calculating gross profits, a firm utilizing FIFO inventory accounting would assume that
A)all sales were from current production.
B)all sales were from beginning inventory.
C)sales were from beginning inventory until it was depleted, and then would use sales from current production.
D)all sales were for cash.

Question

Quizplus · Accepted Answer

FIFO (First-In, First-Out) inventory accounting assumes that the first units of inventory purchased or produced are sold first. Therefore, when calculating gross profits, a firm utilizing FIFO would assume that sales were made from beginning inventory until it was depleted, and then would use sales from the current production. This is because the oldest inventory (first in) is assumed to be sold first, leaving the newest inventory (current production) for sale at a later time.

In Calculating Gross Profits, a Firm Utilizing FIFO Inventory Accounting