Question

Normally, historical cost of inventories should not be determined by _______________.

• A. FIFO method
• B. Average cost method
• C. Base stock method
• D. None of these

Answer 1

The correct option is C Base stock method

The base stock method is a valuation technique for the inventory asset, where the minimum amount of inventory needed to maintain operations is recorded at its acquisition cost, while the LIFO method is applied to all additional inventory. This approach is not acceptable under generally accepted accounting principles.