Indicate whether each of the following statements related to inventory is true or false.________ a)The higher a company's inventory turnover ratio, the higher its cost of financing inventory.________ b)The selling price a company charges for its goods probably will not be affected by the inventory cost flow method it uses.________ c)Other things being equal, if inventory prices are rising, a company that uses the LIFO inventory method will have a higher amount of total assets than if it had used FIFO.________ d)A company that plans to offer a higher level of customer service than its competitors probably will have a higher gross margin percentage than its competitors.________ e)The lower-of-cost-or-market rule may decrease a company's net income, but it will never increase net income.

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b)True c)False d)True e)Ta)This is false. The lower (not higher)the company's inventory turnover ratio, the longer inventory remains in stock before it is sold, the higher the cost of financing inventory.b)This is true. The decision a company makes regarding inventory cost flow is not related to decisions regarding selling prices.c)This is false. If inventory prices are rising, LIFO will produce lower ending inventory than FIFO. Although LIFO will also result in lower income tax expense (decrease in cash), that difference is not as great as the difference in inventory. Therefore, total assets for LIFO will be lower than for FIFO.d)This is true. A company that plans to offer more customer service will typically need to mark up their inventory more than a company that offers less service. Therefore, gross margin will be higher relative to sales, resulting in a higher gross margin percentage.e)This is true. The lower-of-cost-or-market rule may result in a write-down of inventory, which decreases net income. However, since inventory is carried at cost and market cannot be greater than cost, the application of this rule will never result in a markup of inventory (or a resulting increase in net income).

Indicate Whether Each of the Following Statements Related to Inventory