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    Question

    Under inflationary trend, which of the methods will show highest value of inventory?

    A FIFO Correct Answer Incorrect Answer
    B Weighted average Correct Answer Incorrect Answer
    C Specific identification Correct Answer Incorrect Answer
    D LIFO Correct Answer Incorrect Answer
    E None of the above Correct Answer Incorrect Answer

    Solution

    Under inflationary trend, FIFO method will result in showing the highest value of inventory because it assumes that the items that were purchased first are sold first. This means that the items remaining in inventory are assumed to have been purchased at more recent and higher prices, reflecting the rising costs due to inflation. As a result, the cost of goods sold is lower, and the ending inventory is higher, leading to a higher overall value of inventory.

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