Answered: Inventory Costing Method.

Name: Inventory Costing Method. In the period of inflation, businesses will
Uploaded: 2024-03-20T06:32:37.000Z
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Description: Inventory Costing Method. In the period of inflation, businesses will choose to use LIFO, whereas, during the deflation period, they will pick FIFO instead if they want to have the lowest income tax. Why is that?

Business

Accounting

Inventory Costing Method.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter6: Cost Of Goods Sold And Inventory

Section: Chapter Questions

Problem 14DQ: If inventory prices are rising, which inventory costing method should produce the smallest payment...

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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
How would reported income differ if LIFO rather than FIFO were used when purchase prices are rising? When purchase prices are falling?
If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing—FIFO, UFO, or weighted average cost—will yield the lowest an nual income tax expense? Explain.
Which of the following is not a disadvantage of using the FIFO cost flow assumption? includes all the holding gains in income during periods of rising prices does not match current costs against current revenues provides a relevant ending inventory value creates the highest outflow for income taxes during periods of rising prices
Which inventory method will result in lower net income in a period of rising prices? Which inventory method will result in lower net income in a period of falling prices?
If inventory is being valued at cost and the price level is steadily rising, which of the three methods of costing— FIFO, LIFO, or weighted average cost—will yield the lowest annual income tax expense? Explain.
If costs are declining, will the LIFO or FIFO method of inventory valuation yield the lower cost of goods sold? Why?
When purchase prices are rising, which of the following statements is true? a.LIFO produces a higher cost of goods sold than FIFO. b.LIFO produces a higher cost for ending inventory than FIFO. c.FIFO produces a lower amount for net income than LIFO. d.Weighted average cost produces a higher net income than FIFO or LIFO.
Which one of the following statements is true? a. Income manipulation is difficult under LIFO.b. Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.c. Companies may use LIFO for tax purposes and FIFO in the financial statements.d. In periods of declining prices, LIFO will result in the payment of less income taxes.
n a period of rising prices, which method would yield the lowest ending inventory, highest net income and the lowest amount of income taxes?
During a period of rising inventory costs and stable output prices, describe how net income and total assets would differ depending upon whether LIFO or FIFO is applied. Explain how your answer would change if the company is experiencing declining inventory costs and stable output prices.
Compare the financial effects (ignore income tax) of using the FIFO and average inventory cost formulas during a period of declining prices on the following items: (a) (b) (c) (d) (e) Cash (pre-tax), Ending inventory Cost of goods sold Net income Retained earnings FIFO method Lower Higher No effect Average inventory cost method >