A-LevelAccountingPreparation of financial statements9706/12 · Oct/Nov 2019 · Q231 Mark

Inventory cost prices are rising for a business. The company uses AVCO rather than FIFO to value its inventory. What is the effect on inventory valuation and profit of using AVCO rather than FIFO?

Ainventory valuation: higher, profit: higher

Binventory valuation: higher, profit: lower

Cinventory valuation: lower, profit: higher

Dinventory valuation: lower, profit: lower

✓ Correct answer

D: inventory valuation: lower, profit: lower

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Topic: Preparation of financial statements, A-Level Accounting (syllabus 9706). Multiple choice, 1 mark.
Source: A-Level Accounting, Oct/Nov 2019 Paper 1 Variant 2, question 23.

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Inventory cost prices are rising for a business. The company uses AVCO rather than FIFO to value its inventory. What is the effect on inventory valuation and profit of using AVCO rather than FIFO?

✓ Correct answer

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