Jasper owns a small retail store as a sole proprietor. The business records show that the cost of the store's inventory items has been steadily increasing. The cost of the end of the year inventory is $200,000 and the cost of the beginning of the year inventory was $250,000. Jasper uses the FIFO method of inventory valuation. Which of the following statements is true?

Question

Quizplus · Accepted Answer

EC) Jasper's ending inventory cost is lower than the beginning inventory cost ($200,000 vs. $250,000), which could indicate a decrease in the volume of items, assuming prices have not decreased. However, without information on the actual quantity of items or their individual costs, this statement is speculative.E) None of these statements are definitively true based on the information provided. A) is incorrect because the inventory value decrease does not necessarily mean Jasper purchased more than he sold; it could also mean he sold items at a higher cost than those remaining. B) is incorrect because using LIFO during a period of rising costs typically results in a higher cost of goods sold and lower net income, opposite of what is stated. D) is incorrect because, with rising costs, FIFO results in a lower cost of goods sold and higher net income compared to LIFO, not greater as stated.

Jasper Owns a Small Retail Store as a Sole Proprietor