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Accounting Exam 3 Study Guide Questions and Answers
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Accounting Exam 3 Study Guide Questions and Answers
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Accounting Exam 3 Study GuideQuestions and Answers
FIFO method - Answer-First-in, first-out
LIFO method - Answer-Last-in, first-out
4 inventory cost flow assumptions - Answer-FIFO, LIFO, Average, specific identification
Inventory is valued at the what? - Answer-Lower of its cost or market
In a period of rising prices, COGS - Answer-FIFO < avg < LIFO
In a period of rising prices, net income - Answer-FIFO > avg > LIFO
In a period of rising prices, ending inventory - Answer-FIFO > avg > LIFO
In a period of rising prices, tax liability - Answer-FIFO > avg > LIFO
In a period of rising prices, COGS is special because of what? - Answer-FIFO is less
than average and LIFO is greater than avg (FIFO < avg < LIFO)
In a period of rising prices, what do net income, ending inventory, and tax liability have
in common? - Answer-FIFO > avg > LIFO
What happens in a period of declining prices? - Answer-Exact opposite of rising prices
If you understate the beginning, what happens to COGS and net income? - Answer-
COGS is understated, net income is overstated
If you overstate the beginning, what happens to COGS and net income? - Answer-
COGS is overstated, net income is understated
If you understate the ending, what happens to COGS and NI? - Answer-COGS is
overstated, NI is understated
If you overstate the ending, what happens to COGS and NI? - Answer-COGS is
understated, NI is overstated
How to calculate gross profit? - Answer-Sales - COGS
Under the specific identification inventory cost flow method, the unit sold - Answer-Is
identified with a specific purchase (auto dealerships, jewelry stores, art galleries)
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