Question

When using the periodic FIFO inventory cost method, which of the following statements is correct?

a.The cost of merchandise sold is made up of the earliest purchases.
b.The physical count determines the inventory on hand.
c.The cost of merchandise on hand is made up of the most recent costs.
d.All of these choices are correct.

Answer 1

D) All of these choices are correct.

Step-by-step explanation:

FIFO inventory cost method refers to first in, first out. The cost of goods sold is calculated using the oldest merchandise in stock. In other words, the oldest merchandise should be sold first. The FIFO costing method can be used in either perpetual or periodic inventory systems. It is very useful in economies with low inflation rates, since the price of goods don't a lot during the year (e.g. US economy).