Q6. In an inflationary environment, a company’s:

A)   net income will be larger if it uses LIFO than if it uses FIFO.

B)   COGS sold will be lower if it uses LIFO as opposed to FIFO.

C)   assets will be lower if it uses last in, first out (LIFO) as opposed to FIFO.

Q7. During a period of rising prices, the financial statements of a firm using first in, first out (FIFO) reporting, instead of last in, first out (LIFO) reporting would show:

A)   lower total assets and higher net income.

B)   lower total assets and lower net income.

C)   higher total assets and higher net income.

Q8. 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)   $3,640,000.

B)   $3,740,000.

C)   $3,840,000.

Q9. 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)   $2,360,000.

B)   $2,320,000.

C)   $2,395,000.

Q10. During periods of declining prices, which inventory method would result in the highest net income?

A)   LIFO.

B)   Average Cost.

C)   FIFO.

Q11. Which of the following statements regarding inventory methods used during periods of rising prices is least accurate?

A)   FIFO results in higher inventory balances than LIFO.

B)   FIFO results in higher taxes than LIFO.

C)   LIFO results in lower cost of goods sold than FIFO.

答案和详解如下：

Q6. In an inflationary environment, a company’s:

A)   net income will be larger if it uses LIFO than if it uses FIFO.

B)   COGS sold will be lower if it uses LIFO as opposed to FIFO.

C)   assets will be lower if it uses last in, first out (LIFO) as opposed to FIFO.

Correct answer is C)

In an inflationary period, assets will be lower under LIFO since the last, higher priced items are charged to the income statement.

Q7. During a period of rising prices, the financial statements of a firm using first in, first out (FIFO) reporting, instead of last in, first out (LIFO) reporting would show:

A)   lower total assets and higher net income.

B)   lower total assets and lower net income.

C)   higher total assets and higher net income.

Correct answer is C)

When the FIFO method is used when prices are rising, the cheaper goods in beginning inventory, reflecting earlier purchases, are assigned to COGS (hence, higher income) and the more expensive units (last purchases) are assigned to ending inventory (greater current assets). When the LIFO method is used during a period when prices are rising, the more expensive last purchases are assigned to COGS (hence, lower income) and the cheaper units in beginning inventory and earlier purchases are assigned to ending inventory.

Q8. 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)   $3,640,000.

B)   $3,740,000.

C)   $3,840,000.

Correct answer is C)

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 COGS to a FIFO basis, we need to subtract the change in LIFO reserve during the year: $3,740,000 − ($75,000 − $175,000) = $3,840,000.

Q9. 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)   $2,360,000.

B)   $2,320,000.

C)   $2,395,000.

Correct answer is C)

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.

Q10. During periods of declining prices, which inventory method would result in the highest net income?

A)   LIFO.

B)   Average Cost.

C)   FIFO.

Correct answer is A)

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

Q11. Which of the following statements regarding inventory methods used during periods of rising prices is least accurate?

A)   FIFO results in higher inventory balances than LIFO.

B)   FIFO results in higher taxes than LIFO.

C)   LIFO results in lower cost of goods sold than FIFO.

Correct answer is C)         

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.

一天

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