How is the closing inventory valued under the FIFO method?
Practice Questions
1 question
Q1
How is the closing inventory valued under the FIFO method?
Based on the oldest inventory costs
Based on the most recent inventory costs
Average cost of all inventory
Based on the cost of goods sold
Under the FIFO (First In, First Out) method, closing inventory is valued based on the most recent inventory costs.
Questions & Step-by-step Solutions
1 item
Q
Q: How is the closing inventory valued under the FIFO method?
Solution: Under the FIFO (First In, First Out) method, closing inventory is valued based on the most recent inventory costs.
Steps: 5
Step 1: Understand that FIFO stands for First In, First Out. This means that the oldest inventory items are sold first.
Step 2: Identify the total amount of inventory you have at the end of the period (closing inventory).
Step 3: List the costs of the inventory items in the order they were purchased, from oldest to newest.
Step 4: Start from the most recent purchases and work backwards to determine which items are still in inventory.
Step 5: Calculate the value of the closing inventory by taking the costs of the most recent items until you reach the total amount of inventory you have.
