Under which method do ending inventories consist of the oldest items?

Under which method do ending inventories consist of the oldest items?

• A. Oldest items
• B. Newest items
• C. Middle items
• D. All items

Answer: (A)

Under this concept, the way inventory costs are allocated determines which units are considered sold and which remain in ending inventory. With the last-in, first-out approach, the most recently purchased items are assumed to be sold first. That leaves the oldest purchases still on hand, so the ending inventory is made up of the oldest items. For example, if you buy items at costs of 10, 12, and 15 and you sell the most recent ones, the cost of goods sold would use the 15 and 12 costs, while the remaining inventory would be the oldest cost of 10. This shows ending inventory consists of the oldest items. So the option describing ending inventories as consisting of the oldest items aligns with the last-in, first-out method. The other descriptions don’t fit that pattern—newest items would be left under the first-in, first-out method, while “middle” or “all items” don’t reflect a specific costing assumption.

Under this concept, the way inventory costs are allocated determines which units are considered sold and which remain in ending inventory. With the last-in, first-out approach, the most recently purchased items are assumed to be sold first. That leaves the oldest purchases still on hand, so the ending inventory is made up of the oldest items.

For example, if you buy items at costs of 10, 12, and 15 and you sell the most recent ones, the cost of goods sold would use the 15 and 12 costs, while the remaining inventory would be the oldest cost of 10. This shows ending inventory consists of the oldest items.

So the option describing ending inventories as consisting of the oldest items aligns with the last-in, first-out method. The other descriptions don’t fit that pattern—newest items would be left under the first-in, first-out method, while “middle” or “all items” don’t reflect a specific costing assumption.