For Each Item Listed in 1 Through 7, Place the Letter

Essay

For each item listed in 1 through 7, place the letter (a through e) of the accounting effect in the space provided. You may use each letter more than once or not at all.
$\quad$$\quad$$\quad$ Accounting Effects
a. Assets and net income increase
b. Assets and net income decrease
c. Assets decrease and net income increases
d. Assets increase and net income decreases
e. Assets and net income are not affected
____ 1. During a period of increasing inventory and rising prices, a company decides to use FIFO instead of LIFO.
____ 2. During a period of increasing inventory and rising prices, a company decides to use Average instead of FIFO.
____ 3. During a period of increasing inventory and increasing prices, a company uses the LIFO method, which creates the largest cost of goods sold.
____ 4. A company applies lower-of-cost-or-market for valuing ending inventory when market price is less than cost.
____ 5. A company applies lower-of-cost-or-market for valuing ending inventory when cost is less than market price.
____ 6. During an extended period of constant prices, a company adopts LIFO instead of FIFO.