At a Time of Declining Prices, Which Cost Flow Assumption

question 87

Multiple Choice

At a time of declining prices, which cost flow assumption will result in the highest ending inventory?

• A)FIFO
• B)LIFO
• C)Weighted average
• D)Either A or C

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Definitions:

Depreciation

The process of allocating the cost of a tangible or physical asset over its useful life, reflecting wear and tear, age, or obsolescence.

Depreciation

The gradual reduction of the recorded cost of a fixed asset over its useful life, reflecting the asset's wear and tear, obsolescence, or decline in value.

NDP

Net Domestic Product (NDP) refers to the total value of all goods and services produced within a country in a specific time period, minus the total value of the goods and services used up in production.

GDP Deflator

An indicator of the price levels for all newly produced domestic final goods and services within an economy, utilized for transforming nominal GDP into real GDP.