Reading 35: Analysis of Inventories - LOS c, (Part 2) ～ Q

答案和详解如下：

1.Last in, first out (LIFO) results in all of the following during periods of rising prices EXCEPT lower:

A)   taxes.

B)   working capital.

C)   inventory balances.

D)   cost of goods sold.

The correct answer was D)

During periods of rising prices LIFO results in higher cost of goods sold because the last items purchased (most expensive) are the first items sold.

2.Which of the following statements regarding inventory accounting methods is TRUE? In periods of:

A)   rising prices and stable unit purchases, using the FIFO method results in higher inventory turnover than the LIFO method.

B)   declining prices and stable unit purchases, the tax benefits of using LIFO are increased.

C)   declining prices FIFO results in higher net income than LIFO.

D)   rising prices and stable unit purchases, using the LIFO method results in a lower current ratio than the FIFO method.

The correct answer was D)

In periods of rising prices LIFO results in lower current assets because the ending inventory is based on inventory items that were purchased first at a lower price.

3.Which of the following statements regarding inventory methods used during periods of rising prices is FALSE?

A)   LIFO results in lower cost of goods sold.

B)   FIFO results in higher taxes.

C)   LIFO results in lower net income.

D)   FIFO results in higher inventory balances.

The correct answer was A)

LIFO results in higher cost of goods sold during periods of rising prices because the last items bought, which are the most expensive, are the first items sold resulting in a higher cost of goods sold.

4.During periods of declining prices, which inventory method would result in the highest net income?

A)   LIFO.

B)   FIFO.

C)   Weighted Average.

D)   Current Cost.

The correct answer was A)

When prices are declining and LIFO is used the COGS is smaller than if FIFO is used leading to a larger net income.

5.Which of the following statements concerning a period of rising prices is least accurate?

A)   Gross profit using the LIFO inventory valuation method is less than the gross profit using the FIFO method.

B)   Inventory turnover is less using the LIFO inventory valuation method than using the FIFO method.

C)   The current ratio is less in the case of the LIFO out inventory valuation method than for the FIFO method.

D)   The debt-to-equity ratio is greater using the LIFO inventory valuation method than using the FIFO method.

The correct answer was B)

LIFO results in lower inventory and higher COGS during a period of rising prices, hence a higher inventory turnover.