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JAMB Principles of Accounts 2002 Question 36

Question 36

Stock Valuation

Which method of pricing can be used satisfactorily in either a rising or falling price situation?

  1. A.Standard price
  2. B.Market price
  3. C.FIFO
  4. D.Average method.
Show the answer and explanation

Answer: D (Average method.)

Explanation

The average method smooths out price changes, so it gives reasonable values whether prices are rising or falling.