Question

Which of the following cost flow assumptions will yield the highest net income in a period of rising prices?

Question 17 options:

	Specific identification
	FIFO
	LIFO
	Weighted averaging
	Moving averaging

Question 18 (2.5 points)

Kelly and Company began the year with $3,000 in inventory. During the year, it purchased inventory worth $20,000, and made sales of $35,000. The company's year-end inventory balance was $4,000. Compute Kelly's gross profit for the year.

Question 18 options:

	$20,000
	$15,000
	$14,000
	$35,000
	$16,000

Question 19 (2.5 points)

Walton Books purchased inventory for $4,500. Walton pays $275 to have the inventory shipped to its place of business and pays another $120 to set up the inventory. After Walton sold the inventory, it spent $110 to ship it to customers. What is the total amount capitalized to the inventory account by Walton Books?

Question 19 options:

	$4,500
	$4,730
	$4,850
	$5,005
	$4,895

Question 20 (2.5 points)

Under periodic inventory system, cost of goods sold are:

Question 20 options:

	recorded when the purchases are made.
	recorded when the sales are made.
	recorded at current market price.
	recorded before preparing financial statements.
	recorded when payment is received.

Answer 1

A17)	FIFO
	since cost of goods sold will be based on first purchase
	when prices are low
A18)	cost of goods sold
	beginning inventory			3,000
	add purchases			20,000
	less ending inventory			-4,000
	cost of goods sold			19,000
	Gross profit = sales - cost of goods sold
		35,000-19000
		16000	answer
A19)	purchase			4,500
	add freight in			275
	Add setting up cost			120
				4,895	answer
A20)	recorded before preparing financial statements