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During a period of inflation, using — will approximate a companys current cost of ending inventory. O FIFO O both FIFO and t
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Answer #1

Solution:

Answer is: Option 1: FIFO

During a period of inflation, using FIFO will approximate a company's current cost of ending inventory.

Explanation: Under FIFO method during the period of inflation, the cost allocated to the ending inventory will approximate their current cost. Under FIFO method, the cost of first goods purchased are first charged to cost of goods sold when they are actually sold, thus the ending inventory will consist of latest cost of goods purchased. Hence, the FIFO method will approximate the cost of ending inventory during the period of inflation because the ending inventory consist of latest units purchased at latest prices.

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