FIFO Is Considered a Balance Sheet Approach for Reporting Inventory

question 42

Multiple Choice

FIFO is considered a balance sheet approach for reporting inventory because it:

• A)Better approximates the value of ending inventory.
• B)Always results in a lower amount of inventory being reported.
• C)Better approximates inventory cost necessary to generate revenue.

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Definitions:

Elastic

Describes a situation in which the demand or supply for a good or service significantly changes in response to changes in price.

Consumer Surplus

The discrepancy between the total sum consumers are prepared and capable of spending on a product or service and the actual total sum they end up paying.

Price Ceiling

A price ceiling is a government-imposed limit on how high a price can be charged for a product, service, or resource, usually set below the market equilibrium price to make goods more affordable.

Market Equilibrium

A point in a market where the quantity of goods supplied is equal to the quantity of goods demanded.