Chapter 6, Problem 12Q

To determine

Inventory cost flow: It refers to the flow (movement) of inventory when it is purchased or sell by the business organization.

The various inventory cost flow methods are:

• First-in, first-out (FIFO)
• Last-in, first-out (LIFO)
• Average-cost

To identify: The adverse effect of paying all of the net income using FIFO method of inventory valuation during prolonged inflation.