What inventory recording method produces a lower cost of goods sold on the income statement______________?
Show answer Hide answer
Answer: D. First in first out
Explanation
During rising prices, the first-in, first-out inventory method assigns older, lower costs to goods sold. Lower cost of goods sold figures result in higher reported net income on financial statements. The correct choice accurately reflects accounting mechanics during inflationary inventory cost environments. Inventory accounting methods dictate the flow of costs from the balance sheet to the income statement. FIFO assumes that the oldest inventory items purchased are the first ones sold to customers. Inflationary periods cause older inventory acquisition costs to lag significantly behind current replacement costs.
Corporate accountants choose inventory methods carefully to optimize tax liabilities and financial reporting. Financial analysts adjust income statements when comparing companies using different inventory cost flows. Retail businesses with rapid inventory turnover must strictly apply consistent cost recording standards. Last in first out assigns recent higher costs to cost of goods sold during inflation. Last out receivable and first out receivable are fabricated accounting terms not found in GAAP. Alternative selections misstate the chronological cost flow principles governing standard inventory rules.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
Related questions
Q1. How are markets dealing in autos, real estate, cotton, rice, and wheat products categorized___________?
Show answer Hide answer
Answer: A. Physical asset markets
Physical asset markets deal with tangible commodities and real goods such as real estate, agricultural products, and automobiles. These markets involve the exchange of tangible items that possess physical substance and i...
Q2. How are markets dealing with highly liquid and short-term debt instruments classified_____________?
Show answer Hide answer
Answer: B. Money markets
Money markets specialize in the trade of highly liquid debt instruments. Short-term maturity assets are bought and sold in these financial markets. Liquidity and safety are the primary hallmarks of money market instrumen...
Q3. What term defines the legally permissible maturity date determined at the time of bond issuance____________?
Show answer Hide answer
Answer: A. Original maturity
Original maturity refers to the legally permissible maturity date established when a bond is issued. It represents the total lifespan of the debt instrument from issuance until final principal repayment. This term distin...
Q4. How are markets where derivative securities are traded classified ___________?
Show answer Hide answer
Answer: A. derivative security markets
Derivative security markets are specialized exchanges where financial derivatives like options and futures are bought and sold. These organized platforms provide standardized contract specifications and clearinghouse gua...
Q5. How are markets dealing in the purchase and sale of stocks, notes, mortgages, and bonds viewed_____________?
Show answer Hide answer
Answer: B. Financial asset markets
Financial asset markets trade claims on future cash flows like stocks and bonds. Stocks, notes, mortgages, and bonds represent financial asset instruments. Ownership and debt claims are exchanged within these specialized...
Q6. How are markets handling loans for education, autos, appliances, and vacations considered__________?
Show answer Hide answer
Answer: A. Consumer credit loans
Consumer credit loans fund retail purchases such as automobiles, appliances, education, and vacations. These loans allow individuals to finance personal consumption without liquidating savings. Lenders evaluate personal...