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Which inventory valuation method results in the highest ending inventory during

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Question: Which inventory valuation method results in the highest ending inventory during periods of rising prices?

Options:

  1. FIFO
  2. LIFO
  3. Weighted Average
  4. Specific Identification

Correct Answer: FIFO

Solution: 

FIFO (First-In, First-Out) results in the highest ending inventory value during periods of rising prices because the oldest, cheaper costs are matched against current revenues.

Which inventory valuation method results in the highest ending inventory during

Practice Questions

Q1
Which inventory valuation method results in the highest ending inventory during periods of rising prices?
  1. FIFO
  2. LIFO
  3. Weighted Average
  4. Specific Identification

Questions & Step-by-Step Solutions

Which inventory valuation method results in the highest ending inventory during periods of rising prices?
  • Step 1: Understand that inventory valuation methods are ways to calculate the value of the inventory a company has.
  • Step 2: Learn about FIFO (First-In, First-Out) method, which means the oldest inventory items are sold first.
  • Step 3: Recognize that during periods of rising prices, older inventory costs are lower than newer inventory costs.
  • Step 4: Realize that when using FIFO, the remaining inventory consists of the newer, more expensive items.
  • Step 5: Conclude that because FIFO uses the older, cheaper costs for sold items, the ending inventory value is higher.
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