The method of inventory valuation that assumes the earliest inventory acquired is the first to be sold is the:
A)lower of cost and net realisable value method.
B)average cost method
C)FIFO method.
D)LIFO method.

Question

Quizplus · Accepted Answer

The FIFO (First-In, First-Out) method assumes that the earliest inventory acquired is the first to be sold. This method is appropriate when the demand for goods is stable, and prices are rising. As a result, the cost of goods sold will be based on the older, lower cost inventory, which will lead to a higher gross profit. The other options (A, B, D) are also valid methods of inventory valuation, but the FIFO method is the best choice based on the given scenario.

The Method of Inventory Valuation That Assumes the Earliest Inventory