The best inventory valuation method that shows the current economic condition is Fifo. This is because the first inventory received will form the first inventory goods the sold to the consumer. Similarly, it shows a higher ending inventory in addition to the low cost of goods sold and net income (Bragg, 2005) . Ending inventory is valued using the newest and highest cost and accurately approximates the cost of replacing the inventory. However, a retailer can decide to select an approach that best suits its operations. It is possible for example to combine FIFO and LIFO where the costing is done using LIFO and the flow of goods is done using FIFO. The retailer in such a case will value the stock according to the last cost which is then used to prepare an income statement. However, the flow of the goods will involve the disbursement of the goods based on the date they were received with older stock being disbursed first followed by newer stock.
References
Kimmel, P., Weygandt, J., & Kieso, D. (2016). Accounting: Tools for business decision making (6th ed.). John Wiley & Sons.
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