The _____ method of inventory valuation provides the most realistic amount of ending merchandise inventory in the Current Assets section of the balance sheet.
A) last-in, first-out (LIFO)
B) first-in, first-out (FIFO)
C) weighted-average-cost
D) marginal-average-cost

Question

​The _____ method of inventory valuation provides the most realistic amount of ending merchandise inventory in the Current Assets section of the balance sheet.
A) last-in, first-out (LIFO)
B) ​first-in, first-out (FIFO)
C) ​weighted-average-cost
D) marginal-average-cost

Quizplus · Accepted Answer

The FIFO method assumes that the oldest inventory items are sold first, meaning that the remaining inventory consists of the most recently purchased items. This provides a more realistic value for ending inventory on the balance sheet because it reflects the actual cost of the most recent items in inventory. Additionally, FIFO tends to result in higher net income because it assumes that the cheaper, older inventory items were sold first, leaving the more expensive items in inventory, which helps to increase the value of remaining inventory on the balance sheet.

​The _____ Method of Inventory Valuation Provides the Most Realistic

The _____ Method of Inventory Valuation Provides the Most Realistic