Explain the methods of inventory valuation, such as First-In-First-Out (FIFO) and Last-In-First-Out (LIFO), and their effects on cost of goods sold and ending inventory.

Methods of Inventory Valuation: FIFO and LIFO First-In-First-Out (FIFO): FIFO is an inventory valuation method that assumes the first items purchased (first-in) are the first ones to be sold (first-out). Under FIFO, the cost of goods sold (COGS) is calculated using the cost of the oldest or earliest inventory in stock, and the ending inventory is based on the cost of the most recent purchases. Effects on Cost of Goods Sold (COGS) and Ending Inventory: * FIFO results in a higher cost of goods sold when prices are rising because the oldest and lowest-cost inventory is used first. As a result, COGS reflects the lower costs, leading to higher profits in periods of inflation. * The ending inventory is valued at the most recent costs, which typically reflects the current market prices. This means the balance sheet shows a more accurate representation of the company's current assets. Last-In-First-Out (LIFO): LIFO is an inventory valuation method that assumes the last items purchased (last-in) are the first ones to be sold (first-out). Under LIFO, the cost of goods sold (COGS) is calculated using the....