The management of Milque Corp. is considering the effects of various inventory-costing methods on its financial statements and its income tax expense.Assuming that the price the company pays for inventory is increasing, which method will:(a) provide the highest net income?(b) provide the highest ending inventory?|(c) result in the lowest income tax expense?(d) result in the most stable earnings over a number of years?

Particulars Inventory price FIFO LIFO Net income Increasing Increases Decreases Ending inventory…

Answered: The management of Milque Corp. is…

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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A company follows the LIFO inventory method and is experiencing rising costs. What impact will this have on its financial statements during a period of increasing prices? a b C d Higher cost of goods sold and lower net income Lower cost of goods sold and higher net income. Lower inventory turnover and higher gross profit margin. Higher inventory turnover and lower gross profit margin.
Which of the 3 methods of inventory costing (Lifo, Fifo, or Average Cost) will result in the lowest annual income tax expense for the year if prices to acquire the inventory have been steadily rising during the year?
Indicate by a (1), (2), or (0) whether each of the following events wouldprobably cause average annual inventory holdings to rise, fall, or be affectedin an indeterminate manner: c. Competition in the markets in which we sell increases. __________
The management of Milque Corp. is considering the effects of inventory-costing methods on its financial statements and its income tax expense. Assuming that the cost the company pays for inventory is increasing, which method will: (a) (b) (c) Provide the highest net income? Provide the highest ending inventory? Result in the lowest income tax expense? 10
An analyst wants to compare one firm's level of inventory last year to a competitor firm's level of inventory last year. Which one of the following financial statements provided for both firms would best help achieve this objective? Common size income statement Pro forma balance sheet Common size balance sheet Pro forma income statement
Which one of the following is an advantage of LIFO? a. In periods of rising prices, less income taxes are paid b. In periods of rising prices, more holding gains are reported in net income c. Record keeping and financial statement preparation are easier d. Conservative income statement and balance sheet disclousures result from falling prices
Company A uses the FIFO method to cost inventory and Company B uses the LIFO method. Thetwo companies are exactly alike except for the difference in inventory costing methods. Costs ofinventory items for both companies have been falling steadily in recent years and each companyhas increased its inventory each year. Ignore income tax effects.Required:Identify which company will report the higher amount for each of the following ratios. If it is notpossible to identify which will report the higher amount, explain why.1. Current ratio.2. Debt-to-assets ratio.3. Earnings per share.
You are the manager of a successful retail operation. Inflation has been running at 3% per year on the cost of inventory. Which inventory cost flow assumption would you use? FIFO, LIFO, or average? Justify your answer. Which provides the higher gross margin vs. the lower gross margin and why?
Which of the following statements is correct? Group of answer choices A)When cost of goods sold as a percentage of sales decreases, the gross profit percentage will decrease. B)It is possible that when cost of goods sold in dollars increases, cost of goods sold as a percentage of sales decreases. C)If gross profit percentage is the same for the current and past year, then sales and cost of goods sold in dollars did not change. d)If gross profit percentage increases from one year to the next, then the net income percentage will also increase from one year to the next. E)None of the above
When inventory is adjusted down, what is the impact on the balance sheet? a. The value of the asset, Merchandise Inventory, is restated at a more conservative number. b. The value of the asset, Merchandise inventory, is increased to reflect a more optimistic outlook. c. The value of the liability, Selling Expense, would be decreased to reflect a more conservative outlook. d. The value of the liability, Operating Expenses, would be increased to reflect the loss. You are an accountant for ACME Corporation working on inventory valuation. What would prevent you from using LCNRV to adjust the value of your inventory? a. If ACME uses NIFO. b. If ACME uses LIFO to cost inventory. c. If ACME uses FIFO to cost inventory. d. If the Cost of Goods Sold exceeds last quarter’s COGS.
n a period of rising prices, which method would yield the lowest ending inventory, highest net income and the lowest amount of income taxes?
Indicate the effects of the transactions listed, on current assets, current ratios and net income. Use (increase) to indicate an increase, (decrease) to indicate a decrease and (no effect) to indicate no effect or an indeterminate effect. A fully depreciated asset is retired. Net income will experience Choose. Merchandise is sold for cash. Total current assets will Choose. An increase in inventory turnover ratio signifies Choose. in a firm's efficiency. A fixed asset is sold for more than book value. Net income will Choose.

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