section 6

Question 1

LIFO/FIFO Which method would produce the highest net income with no balance of inventory at the end of the period?

Answer 1

no difference when all inventory is sold

Question 2

% mark up on cost is

Answer 2

GM/ COGS
Gross margin divided by cost of goods sold

Question 3

Which method, FIFO or LIFO would produce the highest ending inventory balance in inflationary times?

Answer 3

FIFO because when inventory is higher it indicates lower COGS

Question 4

Which method FIFO or LIFO would produce the lowest ending inventory balance in deflationary times?

Answer 4

FIFO because the higher cost units have been sold and the lower cost units remain

Question 5

Which method would produce the highest net income in a period of stable prices?

Answer 5

No difference between FIFO or LIFO cost flow assumptions because the prices stay the same

Question 6

Which method FIFO or LIFO would produce the highest net income in inflationary times assuming there is no balance of inventory at the end of the period?

Answer 6

if there is no inventory left, then there’s no difference between LIFO and FIFO

Question 7

In perpetual FIFO, what costs are the costs reflected in the ending inventory, assuming that not all inventory is sold

Answer 7

the last costs