Question

Which of the following statements is true regarding FIFO (First In, First Out) inventory valuation method?

a) It reports more recent purchases as inventory.
b) It reports older purchases as inventory.
c) It reports an average cost for inventory.
d) It reports the highest-cost items as inventory.

Answer 1

FIFO (First In, First Out) inventory valuation method reports older purchases as inventory. Option b

Step-by-step explanation:

The correct statement regarding FIFO (First In, First Out) inventory valuation method is b) It reports older purchases as inventory.

FIFO is an inventory valuation method where the oldest inventory items are considered as sold first. This means that the remaining inventory will consist of the more recent purchases.

For example, if a company purchases 10 units at $5 each and later purchases 20 units at $10 each, under FIFO, the company would report the older 10 units at $5 each as inventory, and the more recent 20 units at $10 each as cost of goods sold. Option b