Question

Date Items Cost Total Cost

March 1 10 $120 $1,200

March 4 13 $115 $1,495

March 16 20 $105 $2,100

March 28 18 $100 $1,800

Total 61 $6,595

During the month, 20 of the items were sold. Identify which cost flow assumption would achieve the indicated result.

each answer is either (FIFO, Weighted-average, or lifo)

1. what will cause Higher net income (FIFO, Weighted-average, or lifo)

      [ Choose ]            FIFO            Weighted-Average            LIFO      

2. what will cause Lower net income (FIFO, Weighted-average, or lifo)

      [ Choose ]            FIFO            Weighted-Average            LIFO      

3. what will cause Higher Inventory on the Balance Sheet (FIFO, Weighted-average, or lifo)

      [ Choose ]            FIFO            Weighted-Average            LIFO      

4. what will cause Lower Inventory on the Balance Sheet (FIFO, Weighted-average, or lifo)

      [ Choose ]            FIFO            Weighted-Average            LIFO      

Answer 1

Under FIFO, inventories purchased first are assumed to be sold first.

Under LIFO, inventories purchased last are assumed to be sold first.

As prices are decreasing, FIFO will result in highest cost of goods sold and LIFO will result is lowest cost of goods sold.

1

LIFO will cause Higher net income

2

FIFO will cause Lower net income

3

LIFO will cause Higher Inventory on the Balance Sheet

4

FIFO will cause Lower Inventory on the Balance Sheet