3 9. If goods are shipped FOB LOand the goods are the property of the selling co
ID: 2582438 • Letter: 3
Question
3 9. If goods are shipped FOB LOand the goods are the property of the selling company O3 . " the seller pays for shipping de inventory. $p El Lu LI until cived by the buying company,... L0, Name the four methods of assigning cost to the ending inver and cost of goods sold. ' … 11. A costing method that assumes the first uoods bought were the first 12. A costing method that assumes the sales in the period were made 13, When prices are rising, the cost method that will result in the highest 4. When prices are rising, the cost method that will result in the lowest 3 LO goods sold and, therefore, the latest goods bought remain in inventory is called from the most recently purchased goods and, therefore, the earliest goods bought remain in inventory is called net income is ending inventory is Lo3 3 (15. In the application of "lower-of-cost-or-market," the term "market " /refers to 3 16. The practice of conservatism states we should never anticipate but always anticipate 03 17. The difference between the cost and market value is considered a 03 18. The dollar amount of the loss due to holding inventory is normally 04 19. Under the loss due to holding charged to an account entitled used to estimate the cost of goods sold and ending inventory of both the cost and selling (retail) prices of all goods purchased. method, the firm's normal gross profit can be 4 20. The method of estimating inventory requires keeping record 017 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publExplanation / Answer
Answer 13 - FIFO
Operating profit is maximised when cost is lowest.
Under FIFO, puchases made first are sold first. This means that the cost of goods sold would comprise of material purchased first. Since prices are rising, material purchased first would be cheaper than material purchased later. As such, cost of goods sold would be lower in case of FIFO. Hence, FIFO would result in highest operating income.
Answer 14 LIFO
When prices are rising, the first purchases would be cheaper and purchases made later would be costlier. To have lowest ending inventory, it is required to have cheaper purchases in stock and costlier purchases to get sold. LIFO method requires sale of last purchases which are coatlier in the current case of rising prices.
Answer 15 Net realizable value.
Cost is the purchase price. Market value means the net realizable value which the sale of product would fetch at a particular point of time. Market value is the price at which the product can be sold readily in the market at a point of time. To have a realistic view of closing inventory, it ia valued at cost or market price whichever ia less.
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