A firm utilizing FIFO inventory accounting would, in calculating gross profits, 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 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 the first units sold. Therefore, when calculating gross profits, FIFO assumes that sales were made from beginning inventory until it was depleted, and then uses sales from current production. This method results in a more accurate representation of cost of goods sold and ending inventory when prices of goods are increasing over time.

A Firm Utilizing FIFO Inventory Accounting Would, in Calculating Gross