Question

When inventory prices are increasing, which inventory valuation method would give you the lowest cost of goods sold? B. FIFO LIFO Weighted Average Specific Identification D. The net method of recording sales violates the: A. Matching Principle Cost Principle Revenue Principle De here] D. None of the Above The formula for calculating the COGS when using the periodic inventory system is COGS=COST-SALVAGE VALUE/LIFE COGS=SALES LESS EXPENSES COGS=BI+NP-EI COGSEBEGING INVENTORY-ENDING INVENTORY-GAFS D.

Answer 1

1.When there is rise in the prices then the method which gives high profits and low cost of goods sold is FIFO method .

It is the method of pricing the issues of material in the order in which they are purchased . In other words , the materials are issued in the order in which they arrive in the stores or the items longest in the stores are issued first . Thus each issue of material only recovers the purchase price which does not reflect CURRENT MARKET PRICES.

2. Net method of recording sales violates the NONE.

  Because it does not violates cost principle , revenue principle and matching principle.

   

The formula for recording COGS is

(Beginning inventory +Net purchases ) - ending inventory

that is BI+NP-EI

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