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Match Each Situation Described Below to Inventory Valuation Method in All

Question 132

Matching

Match each situation described below to inventory valuation method In all cases, assume a period of rising prices.

Premises:

Responses:

The method that can only be used if each inventory item can be matched with a specific purchase and its invoice

FIFO, First in, first out

The method that will cause the company to have the lowest income taxes

LIFO,Last in, first out

The method that will cause the company to have the lowest cost of goods sold

SI,Specific identification

The method that will assign a value to inventory that approximates its current cost

WA,Weighted average

The method that will tend to smooth out erratic changes in costs.

Premises:

The method that can only be used if each inventory item can be matched with a specific purchase and its invoice

The method that will cause the company to have the lowest income taxes

The method that will cause the company to have the lowest cost of goods sold

The method that will assign a value to inventory that approximates its current cost

The method that will tend to smooth out erratic changes in costs.

Responses:

FIFO, First in, first out

LIFO,Last in, first out

SI,Specific identification

WA,Weighted average

Correct Answer:

Premises:

Responses:

The method that can only be used if each inventory item can be matched with a specific purchase and its invoice

The method that will cause the company to have the lowest income taxes

The method that will cause the company to have the lowest cost of goods sold

The method that will assign a value to inventory that approximates its current cost

The method that will tend to smooth out erratic changes in costs.