FINANCIAL ACCOUNTING
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ISBN: 9781259964947
Author: Libby
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H7.
For the same transactions, why does the weighted-average cost method provide different value for ending inventory and COGS depending on whether the periodic or perpetual inventory system is used?
Select one: a. Perpetual inventory calculates and assigns costs as items are sold, while periodic inventory calculates and assigns costs at the end of the period.
b. Perpetual inventory calculates and assigns costs at the end of the period, while periodic inventory calculates and assigns costs as items are sold.
c. Perpetual inventory counts all the purchases for the month first before calculating the average cost, while periodic calculates the average cost after every transaction.
d. Perpetual inventory and periodic inventory will not provide different values using
Explain also wrong options and explain with details
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- Ward Hardware does not expect costs to change dramatically and wants to use an inventory costing method that averages cost changes. Requirements 1. Which inventory costing method would best meet Ward's goal? 2. Assume Ward wanted to expense out the newer purchases of goods instead. Which inventory costing method would best meet that need? Requirement 1. The inventory costing method that averages cost changes is the: O A. Last-in, first-out (LIFO) cost method O B. Weighted-average method OC. First-in, first-out (FIFO) cost method O D. Specific identification method Requirement 2. The inventory costing method that expenses out the newer purchases of goods is the: O A. Last-in, first-out (LIFO) cost method B. Weighted-average method Oc. Specific identification method O D. First-in, first-out (FIFO) cost methodarrow_forwardTo determine the cost of ending inventory using the LIFO method: A. the average cost of the inventory is used. B. the beginning inventory and earliest purchase costs are used. C. the specific unit cost of the inventory is used. D. the latest purchase costs are used. thanksarrow_forwardWhich 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 principlearrow_forward
- Explain briefly the application of the LCM rule to ending inventory. Describe its effect on the balance sheet andincome statement when market is lower than costarrow_forwardThe 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?arrow_forwardThe original cost of an item of inventory is above its replacement cost. The item s replacement cost is below its net realizable value but is higher than its net realizable value minus a normal profit. Under the lower of cost or market method, the inventory item should be valued at: a. Net realizable value. b. Original cost. c. Replacement cost. d. Net realizable value less normal profit margin.arrow_forward
- When inventory costs rise and inventory quantities are not decreasing, what does the LIFO produces?arrow_forwardWhich 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.arrow_forwardWhat is the dollar-value method of LIFO inventory valuation?What advantage does the dollar-value methodhave over the specific goods approach of LIFO inventoryvaluation? Why will the traditional LIFO inventory costingmethod and the dollar-value LIFO inventory costingmethod produce different inventory valuations if thecomposition of the inventory base changes?arrow_forward
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