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Match the Statements Below with the Appropriate Cost Flow Method

Question 243

Matching

Match the statements below with the appropriate cost flow method.Some methods may be used more than once and others may not be used at all.

Premises:

Responses:

matches the oldest costs with sales on the income statement

S = Specific identification method

the cost flow method that reduces taxable income,relative to the other methods,in a period of rising inventory costs

L = LIFO

is based on a calculation that divides the cost of goods available for sale by the number of units available for sale

W = Weighted average method

results in the highest current asset balance,relative to the other methods,in a period of rising prices

F = FIFO

would be the best method if inventory costs are rising and the objective is to maximize net income

tends to be used only in low-volume businesses

Premises:

matches the oldest costs with sales on the income statement

the cost flow method that reduces taxable income,relative to the other methods,in a period of rising inventory costs

is based on a calculation that divides the cost of goods available for sale by the number of units available for sale

results in the highest current asset balance,relative to the other methods,in a period of rising prices

would be the best method if inventory costs are rising and the objective is to maximize net income

tends to be used only in low-volume businesses

Responses:

S = Specific identification method

L = LIFO

W = Weighted average method

F = FIFO

Correct Answer:

Premises:

Responses:

matches the oldest costs with sales on the income statement

the cost flow method that reduces taxable income,relative to the other methods,in a period of rising inventory costs

is based on a calculation that divides the cost of goods available for sale by the number of units available for sale

results in the highest current asset balance,relative to the other methods,in a period of rising prices

would be the best method if inventory costs are rising and the objective is to maximize net income

tends to be used only in low-volume businesses

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