Which of the following statements is correct when inventory unit costs are decreasing?
LIFO will result in lower net income and a higher inventory valuation than will FIFO.
LIFO will result in higher net income and a higher inventory valuation than will F

LIFO will result in higher net income and a higher inventory valuation than will FIFO.

A company reported the following information for its most recent year of operation: purchases, $100,000; beginning inventory, $20,000; and cost of goods sold, $110,000. How much was the company's ending inventory?
$10,000
$20,000
$15,000
$30,000

$10,000

Inventory inspection costs are reported as operating expenses on the income statement.
True
False

False

Which of the following costs will not affect cost of goods sold?
Inventory inspection costs.
Inventory preparation costs.
Inventory-related selling costs.
Freight charges incurred to bring inventory to the warehouse.

Inventory-related selling costs.

A company provided the following data: sales, $500,000; beginning inventory, $40,000; ending inventory, $45,000; and gross profit, $150,000. What was the amount of inventory purchased during the year?
$385,000.
$355,000.
$345,000.
$145,000.

$355,000.

During periods of increasing unit costs, the LIFO inventory method will result in a higher inventory amount on the balance sheet and a lower net income than will the FIFO inventory method.
True
False

False

Under the FIFO cost flow assumption during a period of rising costs, which of the following is false?
Income tax expense will be higher under FIFO than under LIFO.
Net income will be higher under FIFO than under LIFO.
Ending inventory will be lower under

Ending inventory will be lower under FIFO than under LIFO.

The choice of cost flow assumption (FIFO, LIFO, or average) does not depend on the actual physical flow of the product.
True
False

True

The LIFO Conformity Rule states that if LIFO is used for:
One class of inventory, it must be used for all classes of inventory.
Tax purposes, it must be used for financial reporting.
One company in an affiliated group, it must be used by all companies in

Tax purposes, it must be used for financial reporting.

Which of the following statements is incorrect?
Ending inventory exceeds beginning inventory when purchases are greater than cost of goods sold.
Cost of goods sold exceeds purchases when ending inventory is less than beginning inventory.
Cost of goods ava

Ending inventory is greater than beginning inventory when purchases are less than cost of goods sold.

Company C is identical to Company D in every respect except that Company C uses LIFO and Company D uses FIFO. In an extended period of rising inventory costs, Company C's gross profit and inventory turnover ratio, compared to Company D's, would be:
Gross

Option d

The journal entry to write-down inventory under the lower of cost or market (LCM) rule results in a credit to cost of goods sold and a debit to inventory.
True
False

False

Coleman Company has provided the following information: beginning inventory, $100,000; cost of goods sold, $450,000; and ending inventory, $80,000. How much were Coleman's inventory purchases?
$450,000
$410,000
$430,000
$420,000

$430,000

During periods of increasing unit costs, the LIFO inventory method results in lower income taxes.
True
False

True

A company can use the LIFO inventory method for income tax purposes and the FIFO inventory method for financial reporting purposes during a given year.
True
False

False

A decrease in the merchandise inventory account occurs when units of inventory purchased are greater than units of goods sold.
True
False

False