A firm utilizing FIFO inventory accounting would, in calculating gross profits, assume that

the items sold are the oldest ones in the inventory.

FIFO (First-In, First-Out) is a method used for inventory accounting. It assumes that the first items acquired or produced are the first ones to be sold. Therefore, when calculating gross profits, a firm using FIFO accounting would assume that the items sold are the oldest ones in the inventory. This means that the cost of goods sold (COGS) will be based on the cost of the oldest inventory, and the remaining inventory will consist of the most recently acquired items.

A firm utilizing FIFO (First-In, First-Out) inventory accounting assumes that the oldest inventory items are sold first. When calculating gross profits, FIFO assumes that the cost of goods sold (COGS) is based on the cost of the oldest inventory items, while the ending inventory value is based on the cost of the most recent purchases.

To calculate gross profits using FIFO, you would follow these steps:

1. Determine the cost of goods sold (COGS): Multiply the quantity of units sold during a specific period by the cost per unit of the oldest inventory items on hand. This represents the cost of the inventory that was sold during that period.

2. Calculate the ending inventory value: Multiply the quantity of remaining units in inventory by the cost per unit of the most recent purchases. This represents the value of the inventory that remains at the end of the period.

3. Subtract the COGS from the net sales: Subtract the COGS calculated in step 1 from the net sales to obtain the gross profit.

By assuming that the oldest inventory is sold first, FIFO reflects the generally accepted principle that inventory items held for a longer period generally have a lower cost. This method can be helpful in times of inflation as it values the inventory at a closer approximation to current market prices.

It is important to note that while FIFO is widely used, other inventory costing methods such as LIFO (Last-In, First-Out), weighted average cost, and specific identification can also be utilized depending on the specific requirements or regulations of a company or jurisdiction.