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Inventory

Forums › ACCA Forums › ACCA FA Financial Accounting Forums › Inventory

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
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  • Author
    Posts
  • April 11, 2021 at 12:26 pm #616733
    Anonymous
    Inactive
    • Topics: 6
    • Replies: 3
    • ☆

    In times of rising prices, the FIFO method of inventory valuation, when compared with the
    average cost method of inventory valuation, will usually produce which of the following?

    A) A higher profit and a lower closing inventory value
    B) A higher profit and a higher closing inventory value
    C) A lower profit and a l ower closing inventory value
    D) A lower profit and a higher closing inventory value

    Could you help me to solve this question?

    April 11, 2021 at 3:58 pm #616795
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54665
    • ☆☆☆☆☆

    In future you must ask in the Ask the Tutor Forum if you want me to answer – this forum is for students to help each other.

    Why are you asking a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA Approved Publishers – they have answers and explanations
    🙂

    FIFO will give a higher value for inventory because it is using the costs of the most recent purchases and if prices have been rising then the recent purchases will have been at a higher cost.

    A higher value for inventory will mean that the cost of sales is lower and therefore the profit will be higher.

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