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What is the primary basis for inventory valuation under the FIFO method?
Practice Questions
Q1
What is the primary basis for inventory valuation under the FIFO method?
First In, First Out
First In, Last Out
Last In, First Out
Weighted Average Cost
Questions & Step-by-Step Solutions
What is the primary basis for inventory valuation under the FIFO method?
Steps
Concepts
Step 1: Understand what FIFO means. FIFO stands for First In, First Out.
Step 2: Know that FIFO is a method used to value inventory.
Step 3: Realize that under FIFO, the oldest items in inventory are sold first.
Step 4: Recognize that this means the cost of the oldest items is used to calculate the cost of goods sold.
Step 5: Conclude that the primary basis for inventory valuation under FIFO is the order in which items are purchased and sold.
No concepts available.
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