Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 78

Describing the Effect of Accounting Decisions on Ratios
For each of the following three accounting choices, indicate the decision that will yield ( a ) a higher net profit margin and ( b ) a lower current ratio. If the decision does not affect the ratio, indicate "no effect."
1. Straight-line versus accelerated depreciation (in the first year of the asset's life).
2. FIFO versus LIFO (in periods of constantly rising costs and rising inventory levels).
3. Straight-line depreciation with a four-year useful life versus a seven-year useful life (no residual value).