Under the LIFO cost flow assumption during a period ofinflation, which of the following is false? A. Cost of goods sold will be lower than under FIFO B. Gross margin will be lower than under FIFO C. Income tax expense will be lower than under FIFO D. Ending inventory will be lower than under FIFO

Under the LIFO cost flow assumption during a period ofinflation, which of the following is false? A. Cost of goods sold will be lower than under FIFO B. Gross margin will be lower than under FIFO C. Income tax expense will be lower than under FIFO D. Ending inventory will be lower than under FIFO

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter9: Operating Activities

Section: Chapter Questions

Problem 9QE

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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

Under the LIFO cost flow assumption during a period of
inflation, which of the following is false?

Cost of goods sold will be lower than under FIFO

Gross margin will be lower than under FIFO

Income tax expense will be lower than under FIFO

Ending inventory will be lower than under FIFO

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When would using the FIFO inventory costing method produce higher inventory account balances than the LIFO method would? A. inflationary times B. deflationary times C. always D. never
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Which one of the following statements is true? a. Under conditions of rising prices, the LIFO method results in lower income than the FIFO method. b. In most cases, the LIFO method approximates the physical flow of items in inventory. c. The LIFO mthod produces a higher ending inventory value than the FIFO method. d. The FIFO method excludes holding gains from income
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Which of the following statements regarding the lower of cost and net realizable value (LCNRV) rule is true? a.The LCNRV rule is an application of the cost principle. b.When the net realizable value of inventory drops below the cost of inventory, an adjustment is made to decrease inventory to its net realizable value and decrease income. c.If a company uses the LCNRV rule, there is no need to use a cost flow assumption such as FIFO, or weighted average cost. d.When the net realizable value of inventory is above the cost of inventory, an adjustment is made to increase inventory to its net realizable value and increase income.
Which inventory cost flow assumption generally results in the lowest reported amount for cost of goods sold when inventory costs are rising? a. Lower of cost and net realizable value. b. First-in, first-out (FIFO). c. Last-in, first-out (LIFO). d. Weighted-average cost.
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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. O True 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? O It understates the value of Inventory in the balance sheet. O It overstates the value of Inventory in the balance sheet.