Indicate whether each of the following statements is true or false.________ a)The FIFO cost flow method assumes that the company physically rotates inventory so that the oldest inventory is sold first.________ b)In a period of rising inventory prices, FIFO gives higher cost of goods sold than LIFO.________ c)Under the weighted-average cost flow method, the average cost per unit equals the cost of goods available for sale divided by the number of units available for sale.________ d)In a period of declining inventory prices, LIFO will result in higher income tax expense than FIFO.________ e)In a period of rising inventory prices, FIFO gives higher ending inventory than LIFO does.

Question

Quizplus · Accepted Answer

b)False c)True d)True e)Ta)This is false. Although FIFO mimics the physical flow of most inventory, the choice of a cost flow method does not necessarily conform to the physical flow of inventory.b)This is false. In a period of rising inventory prices, the cost of the most recent purchases is higher than the cost of older inventory, so LIFO will produce a higher cost of goods sold than FIFO.c)This is true. Average cost per unit = Cost of goods available for sale ÷ Number of units available for sale.d)This is true. In a period of declining inventory prices, the cost of the most recent purchases is lower than the cost of older inventory, so LIFO will produce a lower cost of goods sold than FIFO, resulting in a higher net income and a higher income tax expense.e)This is true. In a period of rising inventory prices, the cost of the most recent purchases (which remain in inventory using FIFO)is higher than the cost of older inventory.

Indicate Whether Each of the Following Statements Is True or False.________