FIFO Accounting Concepts and Applications

The video explains the FIFO (First In, First Out) inventory costing method, using a t-shirt company as an example. It details how to calculate the cost of goods sold and ending inventory under FIFO, and discusses the impact of rising prices on this method.

What does FIFO stand for?

• Fast In, Fast Out

• First In, First Out

• Fast Out, Fast In

• First Out, First In

What is FIFO primarily used for in accounting?

• Inventory management

• Costing assumption

• Sales forecasting

• Tax calculation

In the t-shirt company example, how many t-shirts were sold?

• 350

• 200

• 250

• 300

How many t-shirts were purchased on March 1st?

• 250

• 200

• 150

• 100

What is the specific identification method used for?

• Identifying specific units sold

• Predicting market trends

• Calculating total sales

• Estimating future inventory

Under FIFO, which units are considered sold first?

• Least expensive

• First purchased

• Last purchased

• Most expensive

What is the cost of goods sold for the first 200 t-shirts under FIFO?

• $1,000

• $4,000

• $2,000

• $3,000

How many units remain in ending inventory from the March 16th purchase?

• 200

• 150

• 100

• 50

What is the total value of the ending inventory?

• $3,600

• $4,200

• $4,800

• $5,400

How does FIFO perform in periods of rising prices?

• Overestimates inventory value

• Matches current revenue with current costs

• Underestimates cost of goods sold

• Doesn't match current revenue with current costs