Understanding Inventory Valuation Methods

Which inventory valuation method assumes that the oldest inventory items are sold first?

• LIFO Method

• FIFO Method

• Weighted Average Method

• Specific Identification Method

In the LIFO method, what does LIFO stand for?

• Last In, First Out

• Last In, First On

• Last Inventory, First Out

• Latest In, First Out

Which inventory method averages out the cost of all inventory items available for sale during the period?

• FIFO Method

• LIFO Method

• Weighted Average Method

• Specific Identification Method

How does the FIFO method affect the cost of goods sold during a period of rising prices?

• It increases the cost of goods sold

• It decreases the cost of goods sold

• It has no effect on the cost of goods sold

• It results in the highest cost of goods sold

Which inventory valuation method is likely to result in the lowest ending inventory value during a period of rising prices?

• FIFO Method

• LIFO Method

• Weighted Average Method

• Specific Identification Method

What is the primary advantage of using the Weighted Average Method for inventory valuation?

• It matches the actual flow of goods

• It smooths out price fluctuations

• It results in the lowest tax liability

• It is the easiest to implement

Which inventory valuation method is not allowed under International Financial Reporting Standards (IFRS)?

• FIFO Method

• LIFO Method

• Weighted Average Method

• Specific Identification Method

How does the LIFO method affect net income during a period of rising prices?

• It increases net income

• It decreases net income

• It has no effect on net income

• It results in the highest net income

Which inventory valuation method is most likely to reflect the current market value of inventory on the balance sheet?

• FIFO Method

• LIFO Method

• Weighted Average Method

• Specific Identification Method

What is the impact of using the FIFO method on the income statement during inflationary periods?

• Higher cost of goods sold

• Lower cost of goods sold

• No impact on cost of goods sold

• Higher net income