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Question

??(W) ?? |siti??? ?hm?? ???? ????????,???,??, ??,???,???.1??,????,??.1 -: ·????? ??????? : V?????? |y??(P). 017 Using different cost flow assumption, the Houston Electronics company recognizes different amount of net income. The following is a condensed comparative income statement for Houston Electronics company HOUSTON ELECTRONICS Condensed Income Statements FIFO $18,500 1,000 11,000 12,000 5,800 6,200 12.300 9,000 3,300 LIFO $18,500 1,000 11,000 12,000 5,000 7,000 11,500 9,000 Average-Cost 18,500 Sales revenue Beginning inventory Purchases Cost of goods available for sale Less: Ending inventory Cost of goods sold Gross prott Operating expenses Income before income taxes Income tax expense (30%) Net income 1,000 11,000 12,000 5,400 6,600 11,900 9,000 2.900 870 2.500 990 750 s 2,310 s 1,750 s 2,030 Which of the following statement is FALSE? A. In a period of inflation. FIFO produces a higher net income because low er unit costs of the first units purchased are matched against revenue B. In a period of inflation. LIFO produces a lower net income because higher unit costs of the last goods purchased are matched against revenue C. In a period of deflation (prices fall), FIFO produces a higher net income D. Regardless of whether prices are rising or falling, average-cost produces net income between FIFO and LIFO iffany Company's management mants to maintain a nminimum monthly cash balance of

Explanation / Answer

Answer: option C is False.

In a period of deflation (price falls) FIFO produces a higher net income..

Explanation:

In a period of deflation , FIFO produces a lower net income because higher unit costs of the first units purchased are matched against revenue.

Under FIFO Method

Lower Units cost at stock means higher cost of goods sold and leads to lower net income

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