In a Period of Declining Prices, Which of the Following

question 17

Multiple Choice

In a period of declining prices, which of the following inventory cost formulas generally results in the lowest inventory figure on the statement of financial position?

• A)average cost
• B)FIFO
• C)The figure would be the same under both FIFO and average cost.
• D)Need more information to answer.

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Definitions:

Percentage-of-Completion Method

An accounting method used to recognize revenue and expenses of long-term contracts in proportion to the work completed.

Estimated Revenues

Projections of the amount of money a business expects to receive from its activities or sales within a specific period.

Cost-to-Cost Method

A method used in accounting for long-term contracts where revenue is recognized based on the percentage of project completion, estimated by comparing the costs incurred to the total expected costs.

Construction Contracts

Agreements between parties for executing construction projects, detailing scope, budget, and timeline.