Inventory Costing Method Quiz
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Questions and Answers

During a period of rising costs, FIFO results in higher taxable income compared to LIFO.

True

Under Specific Tracks Identification (SI), companies with higher inventory turnover are advised to use this method.

True

In a period of increasing costs, using the average cost method will result in higher net income compared to FIFO.

False

Regardless of the accounting method used, the balance sheet value for ending inventory will always be lower during periods of increasing costs.

<p>False</p> Signup and view all the answers

Companies should vary their chosen cost accounting method year after year to avoid monotony in financial reporting.

<p>False</p> Signup and view all the answers

With rising costs, the cost of goods sold (COGS) under Specific Tracks Identification (SI) will be lower than under FIFO.

<p>False</p> Signup and view all the answers

The Weighted Average Cost (WAC) method calculates the average unit cost over a period by dividing total units available for sale by total cost available for sale.

<p>True</p> Signup and view all the answers

Higher prices lead to a lower margin of error when using FIFO compared to LIFO.

<p>True</p> Signup and view all the answers

Using FIFO accounting method during inflationary periods will result in higher shareholder equity on the balance sheet.

<p>False</p> Signup and view all the answers

When choosing an inventory cost accounting method, companies should focus on how it impacts their balance sheets and income statements.

<p>True</p> Signup and view all the answers

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