Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

5. Inventory

Periodic Inventory - FIFO, LIFO, and Average Cost

Financial Accounting

5. Inventory

Periodic Inventory - FIFO, LIFO, and Average Cost

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Multiple Choice

Which inventory costing method reports the most current prices in ending inventory?

LIFO (Last-In, First-Out)

Average Cost Method

FIFO (First-In, First-Out)

Specific Identification Method

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Verified step by step guidance

Understand the concept of inventory costing methods: Inventory costing methods determine how the cost of goods sold (COGS) and ending inventory are calculated based on the flow of inventory. Common methods include FIFO, LIFO, Average Cost, and Specific Identification.

Analyze the FIFO (First-In, First-Out) method: Under FIFO, the oldest inventory costs are assigned to COGS, and the most recent inventory costs are used to calculate ending inventory. This means the ending inventory reflects the most current prices.

Compare FIFO with LIFO (Last-In, First-Out): LIFO assigns the most recent inventory costs to COGS, leaving the oldest inventory costs in ending inventory. Therefore, LIFO does not report the most current prices in ending inventory.

Evaluate the Average Cost Method: This method calculates the cost of inventory by averaging the cost of all units available for sale during the period. While it smooths out price fluctuations, it does not specifically reflect the most current prices in ending inventory.

Consider the Specific Identification Method: This method tracks the actual cost of each specific item in inventory. While it can reflect current prices for specific items, it is not practical for large inventories and does not consistently report the most current prices across all inventory.