Which of the Four Inventory Cost Flow Assumptions Transfers the Most

question 20

Multiple Choice

Which of the four inventory cost flow assumptions transfers the most recent purchase cost to the cost of goods sold and the remaining items in inventory are valued at the oldest acquisition costs?

• A) LIFO.
• B) FIFO.
• C) Average.
• D) Specific identification.

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Definitions:

Amortized

The gradual reduction of a loan or debt by regular payments of both interest and principal.

Compounded Monthly

A method of calculating interest where the accrued interest is added to the principal sum each month, so that each subsequent interest calculation is made on a slightly higher amount.

Compounded Annually

The practice of calculating and adding interest to the initial amount of money once every year, increasing the future accruals of interest.

Amortized

Amortized refers to gradually reducing the principle amount owed on a debt over time through a fixed repayment schedule.