For each item listed in, place the letter (a through e) of the accounting effect in the space provided.You may use each letter more than once or not at all.
-During a period of increasing inventory and rising prices, a company decides to use averaging instead of FIFO.
A) Assets and net income increase
B) Assets and net income decrease
C) Assets decrease and net income increases
D) Assets increase and net income decreases
E) Assets and net income are not affected

Question

Quizplus · Accepted Answer

During a period of increasing inventory and rising prices, using averaging instead of FIFO generally results in lower ending inventory values and higher cost of goods sold, because FIFO would have assigned the oldest (and typically lower) costs to COGS. This leads to lower net income and lower assets (due to lower inventory values) compared to FIFO.

For Each Item Listed In, Place the Letter (A Through