Allied Products maintains a large inventory. The company has used the LIFO inventory method for many years, dur-ing which the purchase costs of its products have risen sub-stantially. (More than one of the following answers may be correct.)a. Allied would have reported a higher net income in pastyears if it had been using the average-cost method.b. Allied’s financial statements imply a lower inventoryturnover rate than they would if the company wereusing FIFO.c. If Allied were to let its inventory fall far below normallevels, the company’s gross profit rate would decline .d. Allied would have paid more income taxes in past yearsif it had been using the FIFO method.
Allied Products maintains a large inventory. The company has used the LIFO inventory method for many years, dur-ing which the purchase costs of its products have risen sub-stantially. (More than one of the following answers may be correct.)a. Allied would have reported a higher net income in pastyears if it had been using the average-cost method.b. Allied’s financial statements imply a lower inventoryturnover rate than they would if the company wereusing FIFO.c. If Allied were to let its inventory fall far below normallevels, the company’s gross profit rate would decline .d. Allied would have paid more income taxes in past yearsif it had been using the FIFO method.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 15BEA: Last year, Nikkola Company had net sales of 2,299,500,000 and cost of goods sold of 1,755,000,000....
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Question
Allied Products maintains a large inventory. The company
has used the LIFO inventory method for many years, dur-
ing which the purchase costs of its products have risen sub-
stantially. (More than one of the following answers may be
correct.)
a. Allied would have reported a higher net income in past
years if it had been using the average-cost method.
b. Allied’s financial statements imply a lower inventory
turnover rate than they would if the company were
using FIFO.
c. If Allied were to let its inventory fall far below normal
levels, the company’s gross profit rate would decline .
d. Allied would have paid more income taxes in past years
if it had been using the FIFO method.
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