Which of the following inventory cost method reports most closely the current?
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69.Which inventory costing method most closely approximates current cost for ending inventory?a. Averageb. FIFOc. LIFOd. Specific identification Show
70.The pricing of issues from inventory must be deferred until the end of the accounting period underthe following method of inventory valuation Get answer to your question and much more 71.An inventory pricing procedure in which the oldest costs incurred rarely have an effect on the endinginventory valuation is Get answer to your question and much more 72.Which method of inventory pricing best approximates specific identification of the actual flow ofcosts and units in most manufacturing situations? Get answer to your question and much more
73.Assuming no beginning inventory, what can be said about the trend of inventory prices if cost ofgoods sold computed when inventory is valued using the FIFO method exceeds cost of goods soldwhen inventory is valued using the average cost method?a. Prices decreased.b. Prices remained unchanged.c. Prices increased.d.Price trend cannot be determined from information given. 74.In a period of rising prices, the inventory method which tends to give the highest reported netincome is Get answer to your question and much more 11. Which of the following inventory costing methods reports most closely the current cost ofinventory on the statement of financial position?a.First in, first outb.Specific identificationc.Last in, first outd.Weighted average 12. The retail inventory method would include which of the following in the calculation of thegoods available for sale at both cost and retail? 13. When using the moving average method of inventory valuation, a new unit cost must becomputed after each b.Issuance from inventoryc.Purchase and issuance from inventoryd.Month-end14. In periodic inventory system that uses weighted average cost flow method, the beginninginventory is  15. The use of the gross profit method assumesa.The amount of gross profit is the same as in prior yearsb.Sales and cost of goods sold have not changed from previous yearc.Inventory values have not increased from previous yearsd.The relationship between sales price and cost of goods sold is similar in prior years. Newly uploaded documentsWhat Is Last In, First Out (LIFO)?Last in, first out (LIFO) is a method used to account for inventory that records the most recently produced items as sold first. Under LIFO, the cost of the most recent products purchased (or produced) are the first to be expensed as cost of goods sold (COGS), which means the lower cost of older products will be reported as inventory. Two alternative methods of inventory-costing include first in, first out (FIFO), where the oldest inventory items are recorded as sold first, and the average cost method, which takes the weighted average of all units available for sale during the accounting period and then uses that average cost to determine COGS and ending inventory. Key Takeaways
Understanding Last In, First Out (LIFO)Last in, first out (LIFO) is only used in the United States where all three inventory-costing methods can be used under generally accepted accounting principles (GAAP). The International Financial Reporting Standards (IFRS) forbids the use of the LIFO method. Companies that use LIFO inventory valuations are typically those with relatively large inventories, such as retailers or auto dealerships, that can take advantage of lower taxes (when prices are rising) and higher cash flows. Many U.S. companies prefer to use FIFO though, because if a firm uses a LIFO valuation when it files taxes, it must also use LIFO when it reports financial results to shareholders, which lowers net income and, ultimately, earnings per share. Last In, First Out (LIFO), Inflation, and Net IncomeWhen there is zero inflation, all three inventory-costing methods produce the same result. But if inflation is high, the choice of accounting method can dramatically affect valuation ratios. FIFO, LIFO, and average cost have a different impact:
If prices are decreasing, then the complete opposite of the above is true. Example of Last In, First Out (LIFO)Assume company A has 10 widgets. The first five widgets cost $100 each and arrived two days ago. The last five widgets cost $200 each and arrived one day ago. Based on the LIFO method of inventory management, the last widgets in are the first ones to be sold. Seven widgets are sold, but how much can the accountant record as a cost? Each widget has the same sales price, so revenue is the same, but the cost of the widgets is based on the inventory method selected. Based on the LIFO method, the last inventory in is the first inventory sold. This means the widgets that cost $200 sold first. The company then sold two more of the $100 widgets. In total, the cost of the widgets under the LIFO method is $1,200, or five at $200 and two at $100. In contrast, using FIFO, the $100 widgets are sold first, followed by the $200 widgets. So, the cost of the widgets sold will be recorded as $900, or five at $100 and two at $200. This is why in periods of rising prices, LIFO creates higher costs and lowers net income, which also reduces taxable income. Likewise, in periods of falling prices, LIFO creates lower costs and increases net income, which also increases taxable income. Which inventory method reports most closely the current cost of inventory?Answer and Explanation: The inventory method that results in a cost of ending inventory that is close to the current cost of replacing the inventory is the FIFO method.
Which of the following inventory costing methods most closely matches the cost flow?Answer and Explanation: The answer is C. Specific identification and FIFO. The FIFO and specific identification methods of inventory valuation give the same amounts for ending inventory and cost of goods sold, whether using the periodic or perpetual inventory systems.
Which inventory costing method provides a higher current ratio?Answer and Explanation: The FIFO method would give a better and meaningful current ratio than LIFO because FIFO provides a more accurate value of ending inventory. Under FIFO, the oldest merchandise is sold first, and recent items are reflected in the inventory.
Which is better LIFO or FIFO?FIFO (first in, first out) inventory management seeks to value inventory so the business is less likely to lose money when products expire or become obsolete. LIFO (last in, first out) inventory management is better for nonperishable goods and uses current prices to calculate the cost of goods sold.
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