See-Saw Ltd uses moving weighted average for its inventory,which is valued at $276 000.It is considering a change to FIFO,which would decrease the valuation to $245 000.
-Which of the following would be increased by the change?

Question

Quizplus · Accepted Answer

The change from moving weighted average to FIFO would result in a decrease in the inventory valuation. This decrease would be reflected in the cost of goods sold, as the cost of the older inventory is now being recognized first (under FIFO). Since cost of goods sold is an expense, its increase would decrease net income, which would also decrease income tax payable. Finally, sales would remain the same, as they are not affected by the change in inventory valuation method.

See-Saw Ltd Uses Moving Weighted Average for Its Inventory,which Is