The Walking Dead Company is using LIFO inventory method. With rising prices, they make a large...
The Walking Dead Company is using LIFO inventory method. With rising prices, they make a large inventory purchase on December 31st. This purchase will :
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become part of ending inventory |
|
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become part of cost of goods sold |
|
|
be evenly divided between cost of goods sold and ending inventory |
|
|
increase reported income |
The Dog Company uses first in first out inventory (FIFO). If Dog makes a large inventory purchase on December 31st this will :
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Increase cost of goods sold |
|
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Increase ending inventory |
|
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Increase both ending inventory and cost of goods sold |
|
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Increase reported income |
Homework Answers
When we purchase inventory than it will become the part of inventory of company irrespective of method is following for valuation.
When the inventory is sold than the cost of inventory sold is transferred to Cost of Goods Sold.
If at the time of ending of any period inventory is purchased and not used for production or sales than only inventory value of the period will be increase and it’s become the part of ending inventory.
As per above explanation answers is as below,
Question 1)
Answer = Option 1 = Become part of ending inventory
Question 2)
Answer = Option 2 = Increase ending inventory
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