Which inventory valuation method assumes that the earliest goods purchased are sold first?
Correct answer: C. First-in, first-out method
- A. Weighted average method
- B. Specific identification method
- C. First-in, first-out method
- D. Last-in, first-out method
Explanation
The first-in, first-out method assumes the earliest purchases are issued or sold before later purchases. Therefore, closing inventory usually consists of the most recent purchase costs under this method.
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About Inventory Valuation
Inventory valuation determines the cost of unsold goods and its effect on cost of sales and profit. The work covers inventory counts, included costs, FIFO and weighted-average costing, and the rule that inventory is reported at the lower of cost and net realisable value, not simply at its expected selling price.
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More Inventory Valuation questions
Under IAS 2, inventories are generally measured at which amount?
Which inventory cost flow method is not permitted under IAS 2?
During a period of rising prices, which method generally reports the highest closing inventory value?
A business has 100 units costing Rs. 10 each and 200 units costing Rs. 13 each. Under the weighted average cost method, the cost per unit is:
Net realisable value of inventory is best defined as: