Chapter 6, Problem 25CE

Effects of Inventory Costing Methods

Refer to your answers for Filimonov Inc. in Cornerstone Exercises 6-22 through 6-24.

Required:

1. In a period of rising prices, which inventory costing method produces the highest amount for ending inventory?

2. In a period of rising prices, which inventory costing method produces the highest net income?

3. In a period of rising prices, which inventory costing method produces the lowest payment for income taxes?

4. In a period of rising prices, which inventory method generally produces the most realistic amount for cost of goods sold? For inventory? Would your answer change if inventory prices were decreasing during the period?