1. In a period of rising prices, which inventory costing method produces the higher amount for ending inventory? 2. In a period of rising prices, which inventory costing method produces the higher net income? 3. In a period of rising prices, which inventory costing method produces the lower payment for income taxes? 4. In a period of rising prices, which inventory method generally produces the more realistic amount for cost of goods sold? 5. In a period of rising prices, which inventory method generally produces the more realistic amount for inventory? 6.Would your answer change if inventory prices were decreasing during the period?
Effects of Inventory Costing Methods
Filimonov Inc. has the following information related to purchases and sales of one of its inventory items.
| Date | Description | Units Purchased at Cost | Units Sold at Retail |
| June 1 | Beginning Inventory | 200 units @ $10 = $2,000 | |
| 9 | Purchase 1 | 300 units @ $12 = $3,600 | |
| 14 | Sale 1 | 400 units @ $25 | |
| 22 | Purchase 2 | 250 units @ $14 = $3,500 | |
| 29 | Sale 2 | 225 units @ $25 |
Required:
1. In a period of rising prices, which inventory costing method produces the higher amount for ending inventory?
2. In a period of rising prices, which inventory costing method produces the higher net income?
3. In a period of rising prices, which inventory costing method produces the lower payment for income taxes?
4. In a period of rising prices, which inventory method generally produces the more realistic amount for cost of goods sold?
5. In a period of rising prices, which inventory method generally produces the more realistic amount for inventory?
6.Would your answer change if inventory prices were decreasing during the period?
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