Accounting ch 7

inventory turnover

COGS / average inventory

adjust balance sheet to FIFO

FIFO inventory = LIFO reserve balance + LIFO inventory

Gross profit margin

gross profit / revenue

When the current year's ending inventory amount is overstated, the

net income is overstated

in a period of rising prices, which method has the best physical flow of goods

FIFO

in a period of rising prices, which method reports the largest income

FIFO

LIFO cost of goods sold

FIFO COGS + change in LIFO reserve

adjust the income statement to FIFO

FIFO cost of goods sold= LIFO cost of goods sold - change in LIFO reserve

LIFO Reserve

FIFO ending inventory - Ending balance LIFO

In a period of rising prices, the inventory cost allocation method that tends to result in the lowest reported net income is

LIFO

in a period of rising prices which method minimizes income taxes

LIFO

In a period of rising prices

LIFO has higher COGS FIFO has higher net income, inventory, and income tax

Gross profit=

revenue - COGS