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

When using the periodic FIFO inventory cost method, which inventory costs are assigned to the ending inventory at the end of the period?

The costs of the most recent sales

The average cost of all units available for sale

The costs of the earliest purchases

The costs of the most recent purchases

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Verified step by step guidance

Understand the FIFO (First-In, First-Out) inventory cost method: FIFO assumes that the earliest goods purchased are the first ones sold, meaning the costs of the oldest inventory are assigned to the cost of goods sold (COGS).

Recognize that under the periodic inventory system, inventory updates occur only at the end of the accounting period, not continuously.

Identify the key principle of FIFO for ending inventory: Since the oldest inventory is sold first, the ending inventory consists of the costs of the most recent purchases.

Clarify the distinction between FIFO and other methods: Unlike the average cost method, which uses the weighted average of all units available for sale, FIFO specifically assigns the costs of the latest purchases to the ending inventory.

Conclude that under the periodic FIFO method, the ending inventory at the end of the period reflects the costs of the most recent purchases, as these are the items still remaining in inventory.