Which Inventory Method Generally Best Follows the Matching Principle

question 16

Multiple Choice

Which inventory method generally best follows the matching principle?

• A)Average-cost
• B)LIFO
• C)Whichever method is used for tax purposes
• D)FIFO

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Definitions:

Compounded Annually

Compounded annually is an interest calculation method where the interest earned in one year is added to the principal, and the total becomes the basis for calculating the interest in the following year.

Present Value

The modern assessment of a future money total or cash flow sequence, applying a distinct rate of return.

Compounded Quarterly

The process whereby interest is calculated and added to the principal sum every quarter, leading to compound growth.

Personal Savings

The portion of an individual's income that is not spent on consumption and is set aside for future use.