11.In periods of rising prices and stable or increasing inventory quantities, using the LIFO method for inventory accounting compared to FIFO will have:

A)   higher COGS, lower income, lower cash flows, and lower inventory.

B)   lower COGS, lower income, lower cash flows, and lower inventory.

C)   higher COGS, lower income, higher cash flows, and lower inventory.

D)   lower COGS, higher income, identical cash flows, and lower inventory.

12.A firm ended the last period with inventory of $3.0 million and a last in, first out (LIFO) reserve of $40,000. During the year, it made purchases of $1 million and reported sales of $4 million with a gross margin of 0.58. At the end of the year, it reported a LIFO reserve of $75,000. What is the value of the firm’s ending inventory converted to a first in, first out (FIFO) basis?

A)   $2,395,000.

B)   $2,320,000.

C)   $2,360,000.

D)   $2,435,000.

13.A firm ended the last period with inventory of $4.0 million and a last in, first out (LIFO) reserve of $175,000. During the year, it made purchases of $2.0 million and reported sales of $5.5 million with a gross margin of 0.32. At the end of the year, it reported a LIFO reserve of $75,000. What is the value of the firm’s cost of goods sold (COGS) on a first in, first out (FIFO) basis?

A)   $3,840,000.

B)   $3,740,000.

C)   $3,640,000.

D)   $226,000,000.

14.Assuming high inflation in the short run and lower levels of inflation in the long run, the current ratio of a company using LIFO relative to a firm using FIFO, will be:

A)   lower, and the difference between the two firms' current ratios will increase as inflation decreases.

B)   higher, and the difference between the two firms' current ratios will decrease as inflation decreases.

C)   lower, and the difference between the two firms' current ratios will decrease as inflation decreases.

D)   higher, and the difference between the two firms' current ratios will increase as inflation decreases.

15.In periods of rising prices and stable or increasing inventory quantities, a company using LIFO rather than FIFO will report cost of goods sold and cash flows which are, respectively:

A)            Lower                                 Lower

B)            Higher                                Lower

C)            Lower                                 Higher

D)            Higher                             Higher

答案和详解如下：

11.In periods of rising prices and stable or increasing inventory quantities, using the LIFO method for inventory accounting compared to FIFO will have:

A)   higher COGS, lower income, lower cash flows, and lower inventory.

B)   lower COGS, lower income, lower cash flows, and lower inventory.

C)   higher COGS, lower income, higher cash flows, and lower inventory.

D)   lower COGS, higher income, identical cash flows, and lower inventory.

The correct answer was C)

In periods of rising prices and stable or increasing inventory quantities, the LIFO method – as compared with FIFO – will result in higher COGS, lower taxes, lower net income, lower inventory balances, lower working capital, and higher cash flows.

12.A firm ended the last period with inventory of $3.0 million and a last in, first out (LIFO) reserve of $40,000. During the year, it made purchases of $1 million and reported sales of $4 million with a gross margin of 0.58. At the end of the year, it reported a LIFO reserve of $75,000. What is the value of the firm’s ending inventory converted to a first in, first out (FIFO) basis?

A)   $2,395,000.

B)   $2,320,000.

C)   $2,360,000.

D)   $2,435,000.

The correct answer was

With sales of $4 million and a gross margin of 0.58, the COGS (on a LIFO basis) is 1.68 million. This would leave an ending inventory of 3 million + 1 million - 1.68 million = $2.32 million on a LIFO basis. In order to adjust this to FIFO, we would add the ending LIFO reserve of $75,000 to arrive at $2.395 million.

13.A firm ended the last period with inventory of $4.0 million and a last in, first out (LIFO) reserve of $175,000. During the year, it made purchases of $2.0 million and reported sales of $5.5 million with a gross margin of 0.32. At the end of the year, it reported a LIFO reserve of $75,000. What is the value of the firm’s cost of goods sold (COGS) on a first in, first out (FIFO) basis?

A)   $3,840,000.

B)   $3,740,000.

C)   $3,640,000.

D)   $226,000,000.

The correct answer was A)

With sales of $5.5 million and a gross margin of 0.32, the COGS (on a LIFO basis) is $3.74 million. In order to convert this to a FIFO approximation, we need to subtract the change in LIFO reserve during the year: $3,740,000 - ($75,000 – $175,000) = $3,840,000.

14.Assuming high inflation in the short run and lower levels of inflation in the long run, the current ratio of a company using LIFO relative to a firm using FIFO, will be:

A)   lower, and the difference between the two firms' current ratios will increase as inflation decreases.

B)   higher, and the difference between the two firms' current ratios will decrease as inflation decreases.

C)   lower, and the difference between the two firms' current ratios will decrease as inflation decreases.

D)   higher, and the difference between the two firms' current ratios will increase as inflation decreases.

The correct answer was A)

The LIFO firm's current ratio will be lower and the difference between the two firms' current ratios will increase as inflation decreases. For example, assume purchases equal sales so the quantity of inventory is constant. Inventory value under LIFO will also remain constant as inflation decreases, whereas FIFO inventory value will increase even as the inflation rate decreases. As long as inflation remains positive, the FIFO inventory value and the difference between LIFO and FIFO inventory values will increase, as will the difference between the LIFO and FIFO firms' current ratios.

15.In periods of rising prices and stable or increasing inventory quantities, a company using LIFO rather than FIFO will report cost of goods sold and cash flows which are, respectively:

COGS

Cash Flows

A)            Lower                                 Lower

B)            Higher                                Lower

C)            Lower                                 Higher

D)            Higher                             Higher

The correct answer was D)

In this situation, LIFO results in higher cost of goods sold because it uses the more recent and higher costs than LIFO. LIFO results in higher cash flows because with lower reported income, income tax will be lower.