Which of the Following Should a Business Consider When Choosing

question 25

Multiple Choice

Which of the following should a business consider when choosing between the FIFO and average cost formulas?

• A)Whether the method closely follows the physical flow of goods
• B)Whether the method reports an inventory cost that approximates recent cost
• C)Using the same method for inventory of similar nature and use
• D)All of the above.

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Definitions:

Accumulated Depreciation

The total amount of a tangible asset's cost that has been allocated as depreciation expense over its useful life up to a specific date.

Residual Value

The projected worth of a tangible asset upon reaching the conclusion of its operational lifespan.

Depreciation Expense

An accounting method used to allocate the cost of a tangible or physical asset over its useful life.

Straight-Line Method

A method of calculating depreciation of an asset evenly across its useful life, where the same amount is expensed each year.