1. The choice of an inventory costing method has no significant impact on the fi
ID: 2336098 • Letter: 1
Question
1. The choice of an inventory costing method has no significant impact on the financial statements. Answer:F 2. Of the three widely used inventory costing methods (FIFO, LIFO, and average cost). the LIFO method of costing inventory assumes costs are charged based on the most recent purchases first. Answer:- 3. The two main types of inventory systems are the periodic system and the gross margin method. Answer 4. Under the LIFO inventory costing method, the most recent costs are assigned to ending inventory. Answer 5. Under a periodic inventory system, cost of goods available for sale is ending inventory plus purchases. Answer 6. The average cost method will always yield results between FIFO and LIFO. Answer 7. During periods of decreasing costs, the use of the LIFO method of costing inventory will result in a lower amount of net income than would result from the use of the FIFO method AnswerExplanation / Answer
1. The given statement is not true. The choice of an inventory method has significant impact on financial statements. It will affect the company’s income, Cash flow and Balance sheet. The cost of goods will be higher under LIFO as compared to FIFO in case of Rise in price and increase in inventory scenario.
2. The given statement is true. Under LIFO method of costing inventory costs are charged based on the most recent purchase first.
3. The given statement is not true. Perpetual inventory system and periodic inventory system are the two main types of inventory system
4. The given statement is not true. Under LIFO inventory costing method the ending inventory is made of first Purchases.
5. The given Statement is not true. Cost of goods available for sale in Periodic Inventory system is beginning inventory plus Purchases
6. The given Statement is true. The average cost method will always yield results between FIFO and LIFO
7. The Given Statement is not true. Under the decreasing cost scenario In LIFO method of costing inventory will result in higher amount of net income. in periods of decreasing prices LIFO method tends to give the lowest reported cost of goods sold which results higher net income
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