Review - Use Book and Notes Circle the correct answer. True/False 1. When prices are rising, FIFO results in a higher ending inventory than LIFO. True False 2. We can use the LIFO inventory method only if we know that the newest units are always sold first. True False I 3. Goods in transit would be included in the ending inventory of the buyer and the seller. True False 4. Under the LCM basis, market is defined as current replacement cost, not selling price. True False 5. When beginning inventory is understated, net income will be understated. True False 6. Cost of goods purchased less the ending inventory equals cost of goods sold. True False 7. The LIFO method assumes that the earliest goods purchased are the first to be sold. True False 8. The inventory turnover is computed by dividing the cost of goods sold by the ending Inventory. True False Multiple Choice 1. The cost flow method that results in the lowest income taxes when prices are rising is a. average cost. b. FIFO. C. LIFO. d. specific identification. 2. The data below are for Parrett Enterprises: Beginning inventory Purchase-August Purchase-October 150 units at $2.00 375 units at $1.50 150 units at $3.00 I A periodic inventory system is used; ending inventory is 330 units. What is the ending inventory under FIFO? a. $570 b. $743 c. $593 d. $720 3. Double-counting an inventory item at year end will result in a. understated tax liability. b. overstated cost of goods sold. c. overstated net income. d. understated beginning inventory for the next period