Question

Detailed solution please, thank you.

Discuss the concepts of FIFO ( first in first out ) in stock valuation in time of inflation and rising prices,
and discuss its importance.

Answer 1

FIFO is a stock valuation method that in hand stocks are considered to be from the latest purchase.In this method the unit price are taken in the order of last Purchases.

At the time of Inflation, Stock will valued at a higher price. The latest Purchases are made in high price at the time of Inflation.

Using of FIFO in Inflation results a lower cost of goods sold and a higher net Income