27. Assume U.S. GAAP (generally accepted accounting principles) applies unless otherwise noted.

During a period of rising price levels and rising inventory quantities, the financial statements of a company using FIFO instead of LIFO for inventory accounting will show:

Select exactly 1 answers from the following:
A. lower total assets and lower net income.
B. lower total assets and higher net income.
C. higher total assets and lower net income.
D. higher total assets and higher net income.
答案和详解如下！
Feedback: Correct answer: D

The Analysis and Use of Financial Statements, 3rd edition, Gerald I. White, Ashwinpaul C. Sondhi, and Dov Fried (Wiley, 2003), pp. 198

2006 Modular Level I, Vol. II, pp. 756-758

Study Session 9-39-a, b

compute ending inventory balances and cost of goods sold using the LIFO, FIFO, and average cost methods to account for product inventory and explain the relationship among and the usefulness of inventory and cost-of-goods-sold data provided by the LIFO, FIFO, and average cost methods when prices are 1) stable or 2) changing;

adjust the financial statements of companies using different inventory accounting methods to compare and describe the effect of the different methods on cost of goods sold and inventory balances, discuss how a company抯 choice of inventory accounting method affects other financial items such as income, cash flow, and working capital, and compute and describe the effects of the choice of inventory method on profitability, liquidity, activity, and solvency ratios

In periods of rising prices and stable or increasing inventory quantities, using FIFO instead of LIFO will result in higher income before taxes, income taxes, net income, and assets. Cost of goods sold and cash flow will be lower with FIFO.

d

re

d

D

d

D