U Company and V Company are identical in all the expects, except the fact the U Company follows FIFO and V Company follows LIFO. If the inventory costs are rising, U Company's inventory turnover ratio and gross profit compared to V Company will be:

U Company and V Company are identical in all the expects, except the fact the U Company follows FIFO and V Company follows LIFO. If the inventory costs are rising, U Company's inventory turnover ratio and gross profit compared to V Company will be:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: complete the following table which compares the effects of LIFO, FIFO and weighted-average…

A: Inventory valuation in costing is done using mainly three methods namely FIFO, LIFO and weighted…

Q: Which Inventory Valuation method gives the highest profit when inventory costs are rising? a.…

A: The inventory can be valued using various methods as FIFO, LIFO and average method. Using FIFO, the…

Q: When using a perpetual inventory system and the weighted-average inventory costing method, when does…

A: Perpetual inventory system: The method or system of maintaining, recording, and adjusting the…

Q: . Assume the same facts (in g) except that the company uses the weig average cost flow assumption.…

A: i transaction. Under weighted average method we need to calculate the cost of each unit first. Units…

Q: Which of the following statements is true for a company using the periodic inventory method? A.…

A: Inventory valuation is referred to as that method which helps in assigning a monetary value to the…

Q: If inventory is being valued at cost and the price level is steadily rising, which of the three…

A: Inventory can be defined as a form of asset which is held by a business firm for resale purposes.…

Q: profit margin, and inventory turnover of the company. Explain what each calculated ratio tells you…

A: Financial ratios are quantitative measurements that are used to evaluate and examine several facets…

Q: (True or False) Cost of sales, under the periodic system, is calculated as inventory at start (plus…

A: Periodic Inventory System - Under periodic inventory system cost of goods sold will be calculated at…

Q: Net sales minus cost of good sold is equal to cost of ending inventory. T/F

A: The ending inventory is the amount of inventory left with business at year end.

Q: The inventory valuation method that has the advantages of assigning an amount to inventory on the…

A: Inventory means the stock of goods in hand . Goods means the thing in which the business deals and…

Q: Lower-of-Cost-or-Market Inventory On the basis of the following data: Inventory Quantity 40 37 35…

A: The lower cost or market method is considered an accounting principle that states that inventory…

Q: Like many technology companies, TechnoTools operates in an environment of decliningprices. Its…

A: The last in, first-out (LIFO) is a system utilized to store reports of the latest items first…

Q: Which of the following statements is correct in the context of the Income Statement prepared by a…

A: The Income Statement is prepared in order to show the result of operating a business for a period of…

Q: Identify that if prices are rising, which inventory cost flow method will produce the highest amount…

A: solution Identify that if prices are rising, which inventory cost flow method will produce the…

Q: Explain whether the following situations, taken independently, would be favorable or unfavorable: (…

A: Favorable is the condition that is positive for a business. This implies that the variance or the…

Q: Multiple-step Income Statement.

A: Multiple-step income statement is a format of income statement in which items of revenues and…

Q: Compared to using the FIFO method to account for inventory, during periods of risingprices, a…

A: USING OF LIFO METHOD

Q: For each of the following formulas, select the correct name of the formula: Sales Revenue - Sales…

A: The given formulas are matched below:

Q: For each of the following situations, indicate whether FIFO, LIFO, or weighted average applies: a.…

A: The inventory can be valued using various methods as FIFO, LIFO and average method. FIFO stands for…

Q: ending inventory increases therefore net income under AC and VC will be same Select one: True False

A: The income statement can be prepared using various approaches as contribution margin or absorption…

Q: If the inventory is valued at cost and the price level is steadily increasing, which type of…

A: Under FIFO, goods that are purchased initially are sold first, however, under LIFO it is assumed…

Q: Under the lower of cost or market inventory valuation rule, market value of inventory is defined as:…

A: Market value is the price of an item/product prevailing in the market on the given date.

Q: Company X is competing with company Y. These are their ratios: x y Total Asset Trunover .462 .361…

A: Inventory turnover ratio shows the number of times the inventory is bought and sold during the…

Q: How much are the ending inventory and cost of sales of Thursday Co respectively under average cost…

A: First in, first out:First is, first out is the method of inventory management and inventory…

Q: In a period of rising costs, which inventory valuation method would a company likely choose if they…

A: The objective of the question is to identify the inventory valuation method that would result in the…

Q: Inventory turnover is computed by dividing cost of goods sold by O 2x (ending inventory + beginning…

Q: For companies using LIFO inventory, the lower-of-cost-or-market rule tor inventory tequires a kim to…

A: The lower-of-cost-or-market (LCM) rule for inventory, especially for companies using LIFO (Last In,…

Q: On the basis of the following data: Product InventoryQuantity Cost perUnit Market Value per…

Q: During a period of rising inventory prices, a company's cost of goods sold would be higher using the…

A: LIFO means last in first out where as FIFO means first in first out.Inventory and cost of goods sold…

Q: Assuming that the price the company pays for inventory is increasing, which method will:

A: The appropriate answer is shown below

Q: Whispering Company follows the practice of pricing its inventory at the lower-of-cost-or-market, on…

A: Inventory refers to the stock of goods, raw materials, work- in- progress, or finished products…

Q: The table below lists financial statement items that may be affected by the use of either the FIFO…

A: Rising costs is the situation when the prices keeps on increasing with time.

Q: When the cost of inventory is increasing: LIFO shows lower COGS and lower taxable income FIFO shows…

A: The inventory can be valued using various methods as FIFO, LIFO and average method. The cost of…

Q: Which of the following is true regarding LIFO and FIFO? A) In a period of decreasing costs, LIFO…

A: First in first out is also written as FIFO and last in first out is also written as LIFO. These are…

Q: Multiple Choice. Weighted average. LIFO, FIFO, and the weighted-average inventory cost flow methods…

A: The inventory can be valued using various methods as LIFO, FIFO and weighted average method. The…

Q: In a peiod of rising prices, which method would yield the lowest ending inventory, highest net…

A: The inventory valuation method used to evaluate the closing inventory and cost of goods sold on the…

Q: Gross Margin of a Merchandise Business will be calculated by using which of the following formula?…

A: Introduction: Income statement: All revenues and expenses are shown in income statement. It tells…

Q: If costs are rising, which inventory costing method will result in the lowest income tax expense for…

A: Inventory is very necessary in the business but method of valuation decide the cost of goods sold…

Q: 1. In a period of rising prices, the inventory reported in Huang Company's balance sheet is close to…

A: Note: As per our guidelines, only the first question shall be answered. 1. The FIFO technique is…

Q: Explain how the inventory valuation method (LIFO or FIFO) chosen by a company affects the cost of…

A: Inventory management refers to the valuation of inventory in three ways FIFO, LIFO and weighted…

Q: A company follows the LIFO inventory method and is experiencing rising costs. What impact will this…

A: When a company follows the LIFO inventory method and experiences rising costs, the ending inventory…

Q: The management of Milque Corp. is considering the effects of inventory-costing methods on its…

A: FIFO: In First-in-First-Out method, items purchased initially are sold first. So, the value of the…

Q: 3. What is the purpose of the current ratio? Assume that Island Solutions want to compute its…

A: The current ratio is a financial metric that measures a company's ability to cover its short-term…

Concept explainers

Inventory Accounting

Inventory accounting is that branch of accounting that helps in determining the specific value of assets at different stages of production and development.

Question

U Company and V Company are identical in all the expects, except the fact the U Company follows
FIFO and V Company follows LIFO.
If the inventory costs are rising, U Company's inventory turnover ratio and gross profit compared to V
Company will be:
Lower Higher
Lower Lower
Higher Higher
Higher Lower

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Explain LIFO and FIFO Methods:

VIEW

Step 2: Determine the impact of FIFO on inventory turnover ratio and gross profit ratio:

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

The following information for Tuell Company is available: 1. Assume Tuell uses the LIFO cost flow assumption. what is the correct inventory value in each of the preceding situations under U.S. GAAP? 2. Assume Tuell Uses the average cost inventorγcost flow asstrmption. what is the correct inventory value in each of the preceding situations under U .S. GAAP? 3. Assume that Tuell uses the average cost inventory cost flow assumption. What is the correct inventor)' value rn each of the preceding situations if Tuell uses IFRS?
Inventory Turnover Ratio shows the speed at which the inventory will be converted into sales. Select one: True False
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.
Hoosier Inc. uses the LIFO inventory cost method to prepare the company's tax return. Which method must the company use to account for inventory on their financial statements? Assume US GAAP and rising costs. O FIFO LIFO O Weighted average or LIFO Specific Identification O LIFO or FIFO, but not weighted average
Companies can use various methods to determine the cost of inventory, including FIFO, LIFO, and average cost. In a period in which the cost of inventory is rising, which of the following statements is true? The LIFO method will result in the lowest income tax expense. The LIFO method will result in the highest inventory balance at year-end. The average cost method will result in the highest net income. The LIFO method will result in the lowest cost of goods sold. The average cost method will result in the lowest inventory balance at year-end. The average cost method will result in the highest inventory balance at year-end. The FIFO method will result in the lowest net income. None of the listed choices are correct.
A firm that uses LIFO accounting for inventory in times of rising investory costs will always report lower profit margins than if it used FIFO. Is this correct?
During periods when costs are rising and inventory quantities are stable, cost of goods sold will be: Multiple Choice Lower under average cost than LIFO. Higher under FIFO than average cost. Lower under LIFO than FIFO. Higher under FIFO than LIFO.
In order to get the lowest profits possible in periods of rising inventory costs, the company should use which of the following inventory costing methods? Group of answer choices Average cost Specific identification FIFO LIFO
Stanley's inventory turnover ratio is?