Question

13. When inventory costs are rising a. FIFO COGS is lowest b. FIFO COGS is highest c. FIFO COGS is same d. Gross Profit is lowest

14. If period 1 ending inventory is overstated, then a. COGS is understated b. Gross Profit is overstated c. Net Income is overstated d. All of the above

15. Which of these assets are not depreciated a. Computers b. Production Machines c. Cars d. Land 16. Freight Out is considered in calculating COGS a. True b. False

Answer 1

13) Option B : FIFO COGS is highest

Reason : Because FIFO considers first in first out , Inventory Purchased first will have higher cost ,

COGS = Opening Stock + Purchases - Closing stock

14) Option D : All of the Above

Reason :Overstatement of Inventory means reduction in expenses , thus resulting in Reduction in COGS,Increase in Gross Profit and Net Profit.

15) Option D : Land

Reason : land is a non Depreicable asset and Computers ,Machines & Cars are depreciable assets.

16) B: False

Reason : Freight out is not considered in COGS , Freight in Considered in COGS.