Proponents of the LIFO Inventory cost flow assumption argue that this costing method is superior to the alternatives because it resultsIn better matching of revenue and expense.Required:a. The recent purchase costs to the Cost of Goods Sold account results in better matching of revenue and expense.O TrueFalseb. What is the impact on the carrying value of Inventory in the balance sheet when LIFO rather than FIFO is used during periods ofInflation?O It understates the value of Inventory in the balance sheet.O It overstates the value of Inventory in the balance sheet.

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

Proponents of the LIFO Inventory cost flow assumption argue that this costing method is superior to the alternatives because it results In better matching of revenue and expense. Required: a. The recent purchase costs to the Cost of Goods Sold account results in better matching of revenue and expense. True O False b. What is the impact on the carrying value of Inventory in the balance sheet when LIFO rather than FIFO is used during periods of Inflation? It understates the value of Inventory in the balance sheet. O It overstates the value of Inventory in the balance sheet.

Proponents of the LIFO Inventory cost flow assumption argue that this costing method is superior to the alternatives because it results In better matching of revenue and expense. Required: a. The recent purchase costs to the Cost of Goods Sold account results in better matching of revenue and expense. True O False b. What is the impact on the carrying value of Inventory in the balance sheet when LIFO rather than FIFO is used during periods of Inflation? It understates the value of Inventory in the balance sheet. O It overstates the value of Inventory in the balance sheet.

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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Which U.S. GAAP principle or rule would apply if the net realizable value of acompany’s inventory is below its original cost?a. Lower-of-cost-or-market ruleb. Consistency principlec. Disclosure principled. Historical cost principle
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When inventory costs rise and inventory quantities are not decreasing, what does the LIFO produces?
Which of the following is not affected by an error related to ending inventory? Multiple Choice O O O O O Sales. Net income. Current assets. Gross profit. Cost of goods sold.
Typically, the impact of the LIFO reserve is to decrease cost of goods sold and decrease ending inventory increase cost of goods sold and increase ending inventory increase cost of goods sold and decrease ending inventory have no effect on cost of goods sold and ending inventory
Which of the following statements Is/are true? Multiple Cholce In a period of rising costs and stable inventory levels, using the FIFO method leads to a higher taxable income and higher net income compared to the LIFO method. All of the other answer choices are true. In a period of falling costs and stable inventory levels, cost of goods sold is the same under LIFO and FIFO. In a period of rising costs and stable inventory levels, using the LIFO method leads to a lower taxable income and higher net income compared to the FIFO method.
What is the main criticism of LIFO? A. It presents a balance sheet figure that is out-of-date. B. It artificially creates a higher income. C. It utilizes a unit cost that has no evidence of existence. D. It is often complicated to implement, especially if inventory costs change frequently.
During periods of increasing costs, the use of the FIF0 method of costing inventory will result in a greater amount of net income than would result from the use of the LIFO cost method. True False
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.
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