During a period of consistently rising prices, the method of inventory that will result in reporting the smallest cost of goods sold is

Question

BlackTom AI · Accepted Answer

When prices are rising over time, the cost flow assumption determines which costs are assigned to COGS and which remain in ending inventory.
Option: weighted average. This method blends all costs into a single average before applying them to COGS, so it does not minimize COGS to the level FIFO would in a rising-price environment.
Option: average cost. Similar to weighted average, this assigns a consistent average cost per unit to COGS and ending inventory, so it does not capture the lowest possible COGS under inflationary conditions.
Option: FIFO. Under rising prices, the first (oldest) costs are used for COGS and they are the lowest among the costs in the period, which reduces COGS relative to other methods and increases ending inventory value. Hence, FIFO yields the smallest COGS during inflationary periods.
Option: LIFO. This method uses the most recent (often higher) costs for COGS in a period of rising prices, increasing COGS and lowering ending inventory, which is the opposite of what the question asks.
Thus, among the given choices, FIFO is the approach that results in the smallest cost of goods sold when prices are consistently rising.

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During a period of consistently rising prices, the method of inventory that will result in reporting the smallest cost of goods sold is

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类似问题

If closing stock is understated what affect will this have on the Profit and loss Statement?

The inventory data for an item for November are: Nov. 1 Inventory 20 units at $19 4 Sold 10 units 10 Purchased 30 units at $20 17 Sold 20 units 30 Purchased 10 units at $21 Using a perpetual system, what is the cost of the merchandise sold for November if the company uses LIFO?

During a period of increasing prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory?

Companies using LIFO are required to disclose the amount at which inventory would have been reported had the company used FIFO. The difference between LIFO and FIFO inventories is called the LIFO reserve.

Smith Company purchases $60,000 of inventory during the period and sells $18,000 of it for $30,000. Beginning of the period inventory was $3,000. What is the company’s inventory balance to be reported on its balance sheet at year end?

In general, in a period of rising prices, FIFO produces higher gross profits than LIFO.

Question21 The book value of inventory at initial recognition is: A$ 2,200,000 A$ 2,600,000 A$ 3,000,000 A$ 2,800,000 A$ 2,400,000 ResetMaximum marks: 1 Unflag question undefined

Question11 Using the area-of-interest method, the book value of inventory as of 30 June 2022 is: 4,100,000 2,100,000 2,000,000 820,000 3,280,000 ResetMaximum marks: 1 Unflag question undefined

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ACCT*2200*W04 Final- Requires Respondus LockDown Browser

During a period of consistently rising prices, the method of inventory that will result in reporting the smallest cost of goods sold is

查看解析

登录即可查看完整答案

类似问题

If closing stock is understated what affect will this have on the Profit and loss Statement?

The inventory data for an item for November are: Nov. 1 Inventory 20 units at $19 4 Sold 10 units 10 Purchased 30 units at $20 17 Sold 20 units 30 Purchased 10 units at $21 Using a perpetual system, what is the cost of the merchandise sold for November if the company uses LIFO?

During a period of increasing prices, which of the following inventory methods generally results in the lowest balance sheet amount for inventory?

Companies using LIFO are required to disclose the amount at which inventory would have been reported had the company used FIFO. The difference between LIFO and FIFO inventories is called the LIFO reserve.

Smith Company purchases $60,000 of inventory during the period and sells $18,000 of it for $30,000. Beginning of the period inventory was $3,000. What is the company’s inventory balance to be reported on its balance sheet at year end?

In general, in a period of rising prices, FIFO produces higher gross profits than LIFO.

Question21 The book value of inventory at initial recognition is: A$ 2,200,000 A$ 2,600,000 A$ 3,000,000 A$ 2,800,000 A$ 2,400,000 ResetMaximum marks: 1 Unflag question undefined

Question11 Using the area-of-interest method, the book value of inventory as of 30 June 2022 is: 4,100,000 2,100,000 2,000,000 820,000 3,280,000 ResetMaximum marks: 1 Unflag question undefined

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