Assuming a current ratio of 1.00 and an acid-test ratio of 0.75, how will the purchase of inventory with cash affect each ratio? a. Increase the current ratio and increase the acid-test ratio.b. No change to the current ratio and decrease the acid-test ratio.c. Decrease the current ratio and decrease the acid-test ratio.d. Increase the current ratio and decrease the acid-test ratio.

Q: When there are no inventory at the beginning or at the end of the period, the total purchases will…

A: The total purchase amount is the price agreed upon by the buyer and seller for an item, including…

Q: AD, Inc. uses the LIFO-lower of cost or market method to value inventory. If the inventory value is…

A: For financial reporting purposes, will value the inventory in accounting at lower prices or on the…

Q: If ending inventory is understaffed for year 1, then in year 2…. A. Costa of goods sold and gross…

A: Inventory is the term used in accounting which refers to the goods as well as materials that the…

Q: Proponents of the LIFO Inventory cost flow assumption argue that this costing method is superior to…

A: LIFO is one of the inventory methods used to account for inventory. Here the inventory of the…

Q: 1.  The lower-of-cost-or-market method can be applied to each item of inventory. each major class…

A: In case of multiple questions, we are allowed to solve only the first question. In case if you want…

Q: Match the inventory method with its related characteristic. Assume a period of rising prices in all…

A: The objective of the question is to match the inventory valuation methods (LIFO, FIFO, Weighted…

Q: Which of the following statements is true for a company using the periodic inventory method? A.…

A: Inventory valuation is referred to as that method which helps in assigning a monetary value to the…

Q: Which of the following variations of the reail inventory method would generally result in the lowest…

A: FIFO is a method used to value inventories. In First-In-First-Out (FIFO) method the cost of the…

Q: To hold back unrealized profit in ending inventory, cost of goods sold is decreased. True or False?

A: Unrealized profits in the literal sense means those profits that are not realized yet. Unrealized…

Q: (True or False) Cost of sales, under the periodic system, is calculated as inventory at start (plus…

A: Periodic Inventory System - Under periodic inventory system cost of goods sold will be calculated at…

Q: Net sales minus cost of good sold is equal to cost of ending inventory.   T/F

A: The ending inventory is the amount of inventory left with business at year end.

Q: Compare the financial effects (ignore income tax) of using period of declining prices on the…

A: Depreciation is the process of reducing the value of the assets. It is a non-cash expense of the…

Q: 6. Assume inventory costs are increasing over time. a. Will FIFO or LIFO lead to higher Cost of…

A: The inventory can be valued using various methods as LIFO, FIFO and weighted average.  LIFO stands…

Q: The Quick Ratio is often use in conjuction with the current ratio because A It is easier to…

A: In finance we use different financial ratios to determine the financial health and position of a…

Q: If ending inventory is understated by $25,000, what effect will this have on cost of goods sold and…

A: Formula: Cost of goods sold = Beginning inventory + Purchases - Ending Inventory.

Q: When purchases returns are used in the calculation of cost of sales, it has the effect of reducing…

A: Purchases returns are products that are returned by a company to its suppliers due to various…

Q: During times of inflation, which of these inventory accounting methods is best for cash flow? JUST…

A: given information   need to find the incorrect statement in the below-given options given in the…

Q: If the ending inventory of a firm is overstated by $49,000, by how much and in what direction…

A: Computation of Income: Gross Profit = Sales – COGS COGS = Opening Inventory + Purchases – Closing…

Q: Compared to using the FIFO method to account for inventory, during periods of risingprices, a…

A: USING OF LIFO METHOD

Q: Which of the following will cause a decrease in cash? Increase in A/P Decrease in A/P Increase in…

A: Cash refers to the liquid assets that a company owns. It is used to measure the level of liquidity…

Q: Evaluate different types of risk and costs if the financial director proposed to reduce inventory.…

A: The current ratio is computed by dividing current assets by current liabilities. The acid test ratio…

Q: Inventory Turnover Ratio shows the speed at which the Sales will be converted into cash. Select one:…

A: The ratio analysis helps to analyse the financial statements of the business.

Q: For each item below, indicate whether FIFO or LIFO will generally result in a higher reported amount…

A: Last-in-First-Out (LIFO): In this method, items purchased recently are sold first. So, the value of…

Q: A ____ will cause Cost of Goods Sold to decrease. A. Debit  B. Credit

A: Cost of Goods Sold means Cost involved in making of goods or providing services. Direct Material,…

Q: Which one of the following is incorrect? O a. Goods Available for Sale Opening Inventory + Net…

A: Cost of Goods Sold - Cost of Goods Sold is the cost incurred by the company to sell the goods to the…

Q: ending inventory increases therefore net income under AC and VC will be same Select one: True False

A: The income statement can be prepared using various approaches as contribution margin or absorption…

Q: If the dollar amount in ending accounts payable is greater than the dollar amount in beginning…

A: Solution- Accounts payable are amounts due to vendors or suppliers for goods or services received…

Q: Income is to be evaluated under four different situations as follows: a. Prices are rising: (1)…

A: The inventory can be valued using various methods as LIFO, FIFO and weighted average method. Using…

Q: gross profit method assumes

A: The gross profit technique calculates the value of inventory by combining current period data on net…

Q: When the cost of inventory is increasing: LIFO shows lower COGS and lower taxable income FIFO shows…

A: The inventory can be valued using various methods as FIFO, LIFO and average method. The cost of…

Q: Lower of cost or market is an attribute used for the:   a. initial measurement of accounts…

A: Lets understand the basicsas per IAS 2 "Inventory" inventory should initially be recorded at cost.…

Q: To arrive at gross profit, cost of goods sold is subtracted from the total of sales minus sales…

A: Gross profit is the profit that the company earns after deducting the cost of the goods sold to the…

Q: Assuming rising inventory prices, which statement is correct? Group of answer choices A. FIFO…

A: INTRODUCTION: First in, first out, or FIFO, is a technique of valuing assets or inventories. The…

Q: Which of the following is true regarding LIFO and FIFO? A) In a period of decreasing costs, LIFO…

A: First in first out is also written as FIFO and last in first out is also written as LIFO. These are…

Q: 11. What is the effect on cost of goods sold, gross profit, and net income if ending mer- chandise…

A: Error in inventory recording can be cancelled or we can say nullified within two consecutive…

Q: Compare the financial effects (ignore income tax) of using the FIFO and average inventory cost…

A: FIFO FIFO Means First in, First Out. It is one of the Important Method of Valuation of Inventory.…

Q: The gross profit method and retail inventory method C Are both estimates of ending inventory and…

A: In company, there is a requirement of valuation of the inventory to find out the cost of the goods…

Q: Swing Ltd uses FIFO for its inventory, which is valued at $21,000. It is considering a change to…

A: Inventory should be valued at cost or Net realisable value.

Q: If costs are rising, which of the following will be true?a. The cost of goods sold will be greater…

A:

Q: What is inventory shrinkage? The difference between product cost and retail selling price. The…

A: Inventory shrinkage refers to the discrepancy between the perpetual system generated Inventory level…

Q: In a peiod of rising prices, which method would yield the lowest ending inventory, highest net…

A: The inventory valuation method used to evaluate the closing inventory and cost of goods sold on the…

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.