- CFA Exams
- CFA Level I Exam
- Topic 4. Financial Statement Analysis
- Learning Module 2. Analyzing Income Statements
- Subject 2. Expense Recognition - Inventory
CFA Practice Question
Under which cost flow assumption is the ending inventory composed of the earliest purchased merchandise?
B. LIFO
C. Average Cost
A. FIFO
B. LIFO
C. Average Cost
Correct Answer: B
Under the LIFO (Last-In, First-Out) cost flow assumption, inventory is sold from the most recent purchases, leaving the earliest purchased inventory on hand.
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