Question

Which of the following is true of the FIFO inventory method?

a. It assumes that the cost of the earliest units purchased are the first to be allocated to the ending inventory.
b. It assumes that the cost of the earliest units purchased are the first to be allocated to cost of goods sold.
c. It assumes that the cost of the earliest units purchased are the last to be allocated to cost of goods sold.
d. It assumes that the cost of the earliest units purchased are the last to be allocated to the beginning inventory.

Answer 1

(B) It assumes that the cost of the earliest units purchased are the first to be allocated to cost of goods sold.

Step-by-step explanation:

FIFO means "First-In, First-Out." It is a technique utilized for cost stream suspicion purposes at the expense of products sold estimation. The FIFO technique expects that the most seasoned items in an organization's stock have been sold first. The costs paid for those most established items are the ones utilized in the figuring.

An organization additionally should be cautious with the FIFO technique in that it isn't an exaggerating benefit. This can happen when item costs rise, and those later numbers are utilized at the expense of product estimation rather than the real costs.

Answer 2

Which of the following is true of the FIFO inventory method?

b .it assumes the cost of the earliest units purchased are the first to be allocated to cost of goods sold.

Step-by-step explanation:

FIFO. the earliest goods purchased are the first ones removed from the inventory account.

The inventory asset recorded on the balance sheet contains costs quite close to the most recent costs that could be obtained.