Chapter 10 ACCT

FIFO stands for First in Financial Options.

FALSE

If prices are the same (unchanged), weighted average cost of goods sold will always be higher than FIFO and LIFO

FALSE

LIFO stands for Last Investment Financial Options. It means a company will choose the last investment from a list of options.

FALSE

Sales plus cost of goods sold equals gross profit

FALSE

There is no real difference between FIFO, LIFO, weighted average and specific identification

FALSE

When prices are decreasing LIFO will always have a higher cost of goods sold than FIFO

FALSE

When prices are decreasing LIFO will always have a lower ending inventory than FIFO

FALSE

When prices are decreasing LIFO will always have a lower gross profit sold than FIFO

FALSE

When prices are increasing, FIFO will always have a higher cost of goods sold than LIFO

FALSE

When prices are increasing, FIFO will always have a lower ending inventory than LIFO

FALSE

When prices are increasing, FIFO will always have a lower gross profit than LIFO

FALSE

When prices are increasing, the weighted average ending inventory will always be higher than the FIFO ending inventory

FALSE

When prices are increasing, the weighted average ending inventory will always be lower than the FIFO ending inventory

FALSE

When using the weighted average method, you must recalculate a new average cost every time the company makes a sale

FALSE

A company that sells expensive custom made products will most likely use the specific identification inventory method

TRUE

FIFO stands for First in First Out. It means the first items purchased are the first items sold.

TRUE

If prices remain unchanged, LIFO, FIFO and weighted average will have the same cost of goods sold, ending inventory and gross profit

TRUE

LIFO stands for Last in First Out. It means the last items or most recent items purchased are the first items sold.

TRUE

Sales minus cost of goods sold equals gross profit

TRUE

There are four inventory costing methods: specific identification, FIFO, LIFO and weighted average.

TRUE

When a company purchases identical items at different prices, it can be difficult to identify the cost of these items when sold.

TRUE

When prices are decreasing FIFO will always have a higher cost of goods sold than LIFO

TRUE

When prices are decreasing FIFO will always have a lower ending inventory than LIFO

TRUE

When prices are decreasing FIFO will always have a lower gross profit than LIFO

TRUE

When prices are increasing LIFO will always have a lower ending inventory than FIFO

TRUE

When prices are increasing LIFO will always have a lower gross profit than FIFO

TRUE

When prices are increasing, LIFO will always have a higher cost of goods sold than FIFO

TRUE

When prices differ, the weighted average cost of goods sold will always be in the middle of the FIFO cost of of goods sold and LIFO cost of goods sold

TRUE

When using the weighted average method, you must recalculate a new average cost every time the company makes a purchase

TRUE

You should never include the selling price of the units sold when completing the inventory schedule for units. The inventory schedule should only include the cost of the units.

TRUE