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What is the primary basis for inventory valuation under the FIFO method?
What is the primary basis for inventory valuation under the FIFO method?
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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
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FIFO stands for First In, First Out, meaning the oldest inventory items are sold first.
Questions & Step-by-step Solutions
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Q: What is the primary basis for inventory valuation under the FIFO method?
Solution:
FIFO stands for First In, First Out, meaning the oldest inventory items are sold first.
Steps: 5
Show Steps
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.
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