Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valued using the FIFO method exceeds cost of goods sold when inventory is valucd using the LIFO method? M7-8 LO 7.5 a. Prices decreased. b. Prices remained unchanged. c. Prices increascd. d. Price trend cannot be determined from information given.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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Review Exercises
7-41
M7-8
Assuming no beginning inventory, what can be said
about the trend of inventory prices if cost of goods
sold computed when inventory is valucd using the
FIFO method exceeds cost of goods sold when
inventory is valued using the LIFO method?
Under the dollar-value LIFO inventory method,
Kern's inventory method, Kern's inventory on
December 31, 2016, would be:
LO 7.5
a. $650,000
b. $655,000
c. $660,000
d. $720,000
a. Prices decreased.
When the double-extension approach to the
dollar-value LIFO inventory cost flow method is
used, the inventory layer added in the current year
is multiplied by an index number. How would the
following be used in the calculation of this index
number?
M7-10
b. Prices remained unchanged.
c. Prices increased.
d. Price trend cannot be determined from
information given.
LO 7.7
On December 31, 2015, Kern Company adopted
the dollar-value LIFO inventory method. All of
Kern's inventories constitute a single pool. The
inventory on Dccember 31, 2015, using the dollar-
value LIFO inventory method was $600,000.
Inventory data for 2016 are as follows:
M7-9
LO 7.7
Ending Inventory at
Current-Year Cost
Ending Inventory at
Base-Year Cost
Numerator
Denominator
Not Used
a.
Numerator
Denominator
Not Used
C.
Numerator
Dec. 31, 2016 inventory at year-end
prices
Relevant cost index at year-end (base
year 2015)
Denominator
$780,000
120
Transcribed Image Text:Review Exercises 7-41 M7-8 Assuming no beginning inventory, what can be said about the trend of inventory prices if cost of goods sold computed when inventory is valucd using the FIFO method exceeds cost of goods sold when inventory is valued using the LIFO method? Under the dollar-value LIFO inventory method, Kern's inventory method, Kern's inventory on December 31, 2016, would be: LO 7.5 a. $650,000 b. $655,000 c. $660,000 d. $720,000 a. Prices decreased. When the double-extension approach to the dollar-value LIFO inventory cost flow method is used, the inventory layer added in the current year is multiplied by an index number. How would the following be used in the calculation of this index number? M7-10 b. Prices remained unchanged. c. Prices increased. d. Price trend cannot be determined from information given. LO 7.7 On December 31, 2015, Kern Company adopted the dollar-value LIFO inventory method. All of Kern's inventories constitute a single pool. The inventory on Dccember 31, 2015, using the dollar- value LIFO inventory method was $600,000. Inventory data for 2016 are as follows: M7-9 LO 7.7 Ending Inventory at Current-Year Cost Ending Inventory at Base-Year Cost Numerator Denominator Not Used a. Numerator Denominator Not Used C. Numerator Dec. 31, 2016 inventory at year-end prices Relevant cost index at year-end (base year 2015) Denominator $780,000 120
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