22 Which inventory method generally results in costs allocated toending inventor

Question

22

Which inventory method generally results in costs allocated toending inventory that will approximate their current cost?

A)

LIFO

B)

FIFO

C)

Average Cost Method

D)

Whichever method that produces the highest ending inventoryfigure

Record the following Journal entries

21 In a period of increasing prices, which inventory flowassumption will result in the lowest amount of income taxexpense? A) FIFO B) LIFO C) Average Cost Method D) Income tax expense for the period will be the same under allassumptions.

Explanation / Answer

21.    B. LIFO LIFO gives the lowest profit and therefore lowest taxes. 22. B. FIFO By using FIFO method, ending inventory will have the currentinventories . 10/01 Supplies                   1,000     Accountspayable              1,000 10/01           Rentexpense    1,500                Cash                    1,500

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