QuestionJuly 15, 2025

Which cost flow assumption most closely resembles the actual physical flow of goods? A Lower of cost or net realizable value B FIFO C LIFO D Weighted average

Which cost flow assumption most closely resembles the actual physical flow of goods? A Lower of cost or net realizable value B FIFO C LIFO D Weighted average
Which cost flow assumption most closely resembles the actual physical flow of goods? A Lower of cost or net realizable value B FIFO C LIFO D Weighted average

Solution
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Answer

B FIFO Explanation 1. Identify cost flow assumptions FIFO, LIFO, and Weighted Average are cost flow assumptions. Lower of cost or net realizable value is a valuation method, not a cost flow assumption. 2. Determine physical flow resemblance FIFO (First-In, First-Out) assumes the oldest inventory items are sold first, resembling the actual physical flow of many goods.

Explanation

1. Identify cost flow assumptions<br /> FIFO, LIFO, and Weighted Average are cost flow assumptions. Lower of cost or net realizable value is a valuation method, not a cost flow assumption.<br />2. Determine physical flow resemblance<br /> FIFO (First-In, First-Out) assumes the oldest inventory items are sold first, resembling the actual physical flow of many goods.
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