Question

For each of the following statements, indicate whether the correct answer is FIFO, LIFO, or neither. **Pay special attention to whether prices are rising or declining.

For each of the following statements, indicate whether the correct answer is FIFO, LIFO, or neither. ** Pay special attention to whether prices are rising or declining. When inventory costs are rising, this method yields the lowest income tax expense. Choose... When inventory costs are declining, this method yields the highest gross profit. Choose... When inventory costs are rising, this method yields the lowest cost of goods sold. Choose... - When inventory costs are declining, this method yields the lowest cost of ending inventory. Choose... When inventory costs are rising, this method yields the lowest sales revenue. Choose...

Answer 1

1) LIFO:

( when inventory cost are rising, LIFO uses most recent purchases, which increases cost of good sold, and higher cost reduces profit, and that leads to lowest income tax expense.)

2) LIFO:

(As we know, LIFO uses the most recent purchases,if cost are declining, it will lead to reduced cost of good'sold, which eventually increases the gross profit.)

3) FIFO:

( FIFO, uses the , earlier purchases first., so even when cost are rising, it will uses the units purchased earlier at lower cost so its yields the lowest cost of good sold.)

4) FIFO:

(  In FIFO method , ending inventories are nothing but recent purchases, so if costs are declining , fifo will yields the lowest cost of ending inventory.)

5) Neither:

(Only cost does not affect sales revenue, if sales price increase/ decreases its impacts sales. Therefore answer is neither.)