Fundamental Accounting Principles Study Set 5
Quiz 6: Inventories and Cost of Sales
Whether purchase costs are rising or falling, FIFO always will yield the highest gross profit and net income.
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A company can change its inventory costing method without mentioning this change in its financial statements because it is an internal management decision.
An advantage of the weighted average inventory method is that it tends to smooth out erratic changes in costs.
In a period of rising purchase costs, FIFO usually gives a lower taxable income and therefore, yields a tax advantage.
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