which of the three methods of costing-FIFO, LIFO, or average cost-will yield (a)cause an overstatement or an understatement of the gross profit for the year? (b)the highest inventory cost, (b) the lowest inventory cost, (c) the highest gross profit,2. The inventory at the end of the year was understated by $12,750. (a) Did the errorWhich items on the balance sheet at the end of the year were overstated or understatedPart One: Explanationand (d) the lowest gross profit? Show using example?as a result of the error? Show it numerically?3. If ending inventory is misstated, it will not have an effect in the owners' equity of thefollowing period. Why?4. In periods of declining prices, which costing method are not preferable income taxpurposes? Why?5. Under what situation is the production method of depreciation appropriate? State anddescribe the drawback of the production method of depreciation?6. Write the required data for preparing employee payroll?

FIFO, LIFO and weighted average are different cost flow assumptions with regard to the cost of…

Part One: Explanation 1. If merchandise inventory is being valued at cost and the price level is decreasing, which of the three methods of costing-FIFO, LIFO, or average cost-will yield (a) the highest inventory cost, (b) the lowest inventory cost, (c) the highest gross profit, and (d) the lowest gross profit? Show using example? 2. The inventory at the end of the year was understated by $12,750. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the balance sheet at the end of the year were overstated or understated as a result of the error? Show it numerically? If ending inventory is misstated it ull affect in the owners' equity of the 3

Part One: Explanation 1. If merchandise inventory is being valued at cost and the price level is decreasing, which of the three methods of costing-FIFO, LIFO, or average cost-will yield (a) the highest inventory cost, (b) the lowest inventory cost, (c) the highest gross profit, and (d) the lowest gross profit? Show using example? 2. The inventory at the end of the year was understated by $12,750. (a) Did the error cause an overstatement or an understatement of the gross profit for the year? (b) Which items on the balance sheet at the end of the year were overstated or understated as a result of the error? Show it numerically? If ending inventory is misstated it ull affect in the owners' equity of the 3

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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