29. When inventory prices are rising (inflation) which method will ive you the l

Question

29. When inventory prices are rising (inflation) which method will ive you the lowest net income? LIFO Average Cost FIFO specific identification 30. An account receivable in the amount of $3200 was written off last year. The company uses the allowance method. Subsequently, after the write off, the customer paid them one half of the amount owed. Please prepare journal entries to record the subsequent collection. 31. A company has a current ratio of 3:1 and a quick ratio of 2:1 if inventory is purchased on account: quick ratio and current ratio increase quick ratio and current ratio decrease quick ratio goes up, current ratio goes down quick ration goes down and the current ration goes up none of the above

Explanation / Answer

29.

When inventory prices are rising, LIFO method gives the lowest net income because the latest purchases are sold first and the ending inventory consists of the earliest purchases in LIFO.

The answer is A.

30.

31.

Current ratio = Current assets / Current liabilities

Quick ratio = (Current assets - Inventory - Prepaid expenses) / Current liabilities

If inventory is purchased on account, Inventory and Accounts payables increases.

Quick ratio and Current ratio decrease.

The answer is B.

Accounts Receivable (3,200/2) 1,600 Allowance for uncollectible 1,600

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