ACC205 Principles of Accounting IHorngren, C.T., Harrison W.T., Oliver M.S. (2011). Accounting(9th ed). Upper Saddle River, New Jersey: Pearson Prentice Hall: ISBN: 9780132569057Merchandise Inventory. Describe the inventory valuation methods FIFO and LIFO. Which items are included in ending inventory under each method?Under FIFO, it is assumed that items purchased first are sold first.Under LIFO, it is assumed that items purchased last are sold first. Example: FIFO vs. LIFOCost of goods soldCost of ending inventoryBeginning inventory + PurchasesFIFO, Perpetual$11,000$8,600$19,600LIFO, Perpetual$12,400$7,200$19,600FIFO assumes that items purchased FIRST are sold FIRST.--> Cost of old purchase is recorded as cost of goods sold.