In Periods of Rising Prices, the Ending Inventory Using the FIFO

question 149

Multiple Choice

In periods of rising prices, the ending inventory using the FIFO cost formula will be

• A) higher than using the average cost method.
• B) can not be determined.
• C) lower than average cost.
• D) the same as average cost.

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Definitions:

Compensating Balances

A minimum account balance that a company agrees to maintain in a bank account to offset the cost of banking services provided.

Transactions Balance

The amount of money held to conduct transactions in the short term, usually reflecting the liquidity needs of an individual or a company.

Accounts Receivable

Liabilities of customers to a firm for items or services supplied, pending payment.

Economic Conditions

The state of an economy at a given time, influenced by factors like GDP, unemployment rates, inflation, and government policies.