In a period of deflation (i.e. the per unit cost of inventory purchasesdecreases over time), which inventory method will produce the highestending inventory balance for that period assuming not all inventory issold?a. FIFOb. LIFOc. Moving Averaged. All methods would generate the same ending inventory balance.

FIFO (First-In, First-Out):Inventory that is older and more expensive gets sold first.The newest…

Answered: In a period of deflation (i.e. the per…

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter9: Operating Activities

Section: Chapter Questions

Problem 7QE

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Similar questions

When would using the FIFO inventory costing method produce higher inventory account balances than the LIFO method would? A. inflationary times B. deflationary times C. always D. never
Use the weighted-average (AVG) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions.
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?
Use the last-in, first-out (LIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for A75 Company, considering the following transactions.
What does an increase in inventory imply? How would this increase in inventory be reported under the indirect method?
Which of the following financial statements would be impacted by a current-year ending inventory error, when using a periodic inventory updating system? A. balance sheet B. income statement C. neither statement D. both statements
Use the first-in, first-out method (FIFO) cost allocation method, with perpetual inventory updating, to calculate (a) sales revenue, (b) cost of goods sold, and c) gross margin for B75 Company, considering the following transactions.
In rimes of rising prices, the inventory cost method that will yield the highest cost of goods sold is (a) LIFO. (b) weighted-average. (c) FIFO. (d) none of the above.
Calculate a) cost of goods sold, b) ending inventory, and c) gross margin for A76 Company, considering the following transactions under three different cost allocation methods and using perpetual inventory updating. Provide calculations for weighted average (AVG).
Inventory Valuation Specific identification method Weighted average cost method FIFO method LIFO method LIFO liquidation LIFO conformity rule LIFO reserve Replacement cost Inventory profit Lower-of-cost-or-market (LCM) rule Inventory turnover ratio Number of days sales in inventory Moving average (Appendix) The name given to an average cost method when a weighted average cost assumption is used with a perpetual inventory system. An inventory costing method that assigns the same unit cost to all units available for sale during the period. A conservative inventory valuation approach that is an attempt to anticipate declines in the value of inventory before its actual sale. An inventory costing method that assigns the most recent costs to ending inventory. The current cost of a unit of inventory. An inventory costing method that assigns the most recent costs to cost of goods sold. A measure of how long it takes to sell inventory. The IRS requirement that when LIFO is used on a tax return, it must also be used in reporting income to stockholders. An inventory costing method that relies on matching unit costs with the actual units sold. The portion of the gross profit that results from holding inventory during a period of rising prices. The result of selling more units than are purchased during the period, which can have negative tax consequences if a company is using LIFO. The excess of the value of a companys inventory stated at FIFO over the value stated at LIFO. A measure of the number of times inventory is sold during the period.
Which of the following indicates a positive trend for inventory management? A. increasing number of days sales in inventory ratio B. increasing inventory turnover ratio C. increasing cost of goods sold D. increasing sales revenue
The answer is d, ex In a period of rising prices, the inventory method which tends to report the lowest inventory is a. FIFO. b. LISH. c. Specific identification. d. Average - cost.

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