1) Which method would result in the highest amount of inventory in periods of rising prices?

Select one:

a. FIFO

b. Weighted Average

c. LIFO

2) Which method would result in the highest net income in periods of falling prices?

Select one:

a. LIFO

b. FIFO

c. Weighted Average

3) Which method would produce the same unit cost for Inventory and Cost of Good Sold in periods of rising prices?

Select one:

a. FIFO

b. LIFO

c. Weighted Average

4) Which method would be preferred to reduce income taxes in periods of rising prices?

Select one:

a. LIFO

b. Weighted Average

c. FIFO

5) Which method results in a balance sheet valuation of inventory method farthest away from its economic value?

Select one:

a. FIFO

b. LIFO

c. Weighted Average

6) Which of the following statements is true?

Select one:

a. There is a big difference in CGS for the different methods when a firm has high inventory turnover.

b. The cost flow assumption used must match the physical flow of goods through the firm.

c. Firms that use LIFO for tax purposes must also use it for book purposes.

d. The Weighted Average Method can lead to phantom profits in periods of rising prices.