When using the periodic FIFO inventory cost method, which inventory costs are assigned to the ending inventory at the end of the period?

• A. The costs of the most recent sales
• B. The average cost of all units available for sale
• C. The costs of the earliest purchases
• D. The costs of the most recent purchases

Answer: (D)

Verified step by step guidance

1. Understand the FIFO (First-In, First-Out) inventory cost method: FIFO assumes that the earliest goods purchased are the first ones sold, meaning the costs of the oldest inventory are assigned to the cost of goods sold (COGS).
2. Recognize that under the periodic inventory system, inventory updates occur only at the end of the accounting period, not continuously.
3. Identify the key principle of FIFO for ending inventory: Since the oldest inventory is sold first, the ending inventory consists of the costs of the most recent purchases.
4. Clarify the distinction between FIFO and other methods: Unlike the average cost method, which uses the weighted average of all units available for sale, FIFO specifically assigns the costs of the latest purchases to the ending inventory.
5. Conclude that under the periodic FIFO method, the ending inventory at the end of the period reflects the costs of the most recent purchases, as these are the items still remaining in inventory.