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Q. In the year ended 31 aug 20×4 ,aplus records show closing inventory of 1000 units compared
to 950 units of opening inventory.
which of the following statement is true, assuming that prices have fallen throughout the year ?
1. Closing inventory and profit are lower using FIFO rather AVCO
2. Closing inventory and profit are higher using FIFO rather AVCO
3. Closing inventory is higher and profit lower using FIFO rather AVCO
4. Closing inventory is lower and profit higher using FIFO rather AVCO
Please do not simply type out full questions and expect to be provided with a full answer. You must have an answer in the same book in which you found the question so ask about whatever it is in the answer that you are not clear about and then I will explain!
FIFO will give a lower value for closing inventory and therefore the profit will be lower using FIFO.