Solved

Match Each Description to the Appropriate Cost Flow Assumption

Question 207

Matching

Match each description to the appropriate cost flow assumption.

Premises:
Produces the same cost of goods sold under both the periodic and the perpetual inventory systems
Rarely used with a perpetual inventory system
Produces results that are similar to the specific identification method
Widely used for tax purposes
Never results in either the highest or lowest possible net income
Produces the highest gross profit when costs are decreasing
Produces the highest ending inventory when costs are increasing
Assigns the same value to all inventory units
Prohibited under International Financial Reporting Standards (IFRS)
Does not follow the physical flow of goods in most cases
Cost of the latest purchases are assigned to ending inventory
Responses:
FIFO
LIFO
Weighted average

Correct Answer:

Produces the same cost of goods sold under both the periodic and the perpetual inventory systems
Rarely used with a perpetual inventory system
Produces results that are similar to the specific identification method
Widely used for tax purposes
Never results in either the highest or lowest possible net income
Produces the highest gross profit when costs are decreasing
Produces the highest ending inventory when costs are increasing
Assigns the same value to all inventory units
Prohibited under International Financial Reporting Standards (IFRS)
Does not follow the physical flow of goods in most cases
Cost of the latest purchases are assigned to ending inventory
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