which inventory costing method produces the highest amount for net income course hero

by Oswald Volkman Published 2 years ago Updated 1 year ago 10 min read

When purchase costs regularly rise, the inventory costing method that yields the highest reported net income is: FIFO method. lower of cost or market for inventory applied

Full Answer

Which inventory costing method results in the lowest taxable income?

In a period of rising prices, the inventory method which tends to give the highest reported net income is a. base stock. b. first-in, first-out. c. last-in, first-out. d. weighted-average.

What type of inventory system does a company use?

3 . Identify the correct statement. a) If the FIFO method of inventory costing is selected by a company the method shall be used for all inventory items . b) Under the average cost method , the same unit cost is used to compute both the cost of goods sold and the cost of inventory . c) One of the major drawbacks of LIFO is that it does not ...

Who is responsible for the inventory control of a company?

Mar 22, 2016 · Beginning merchandise inventory was $35,000, and ending merchandise inventory was $45,000. Determine Maestro’s inventory turnover for the year. Round to the nearest hundredth. a. 6.57 times per year b.5.75 times per year c. 5.11 times per year d.17.39 times per year 9A.Suppose Nile.com used the LIFO inventory costing method and the periodic ...

How many explanations are there in Horngren's cost accounting?

Which of the following inventory costing methods yields the highest net income during a period of rising inventory costs? A.first− in,first−out B.specific …

Which inventory costing method produces the highest amount for net income?

In periods of rising prices, the fifo method yields the highest amount for ending inventory, the lowest cost of merchandise sold, and the highest net income.

What costing method gives the highest ending inventory?

1. First In, First Out (FIFO) FIFO says that you will sell the oldest goods in your inventory first. So, assuming that prices rise over time (they usually do), the ending inventory is valued higher at recent costs.Jan 13, 2020

Which method of inventory costing is the best?

The most popular inventory accounting method is FIFO because it typically provides the most accurate view of costs and profitability.

When prices are rising LIFO will result in the lowest net income?

So, the cost of the widgets sold will be recorded as $900, or five at $100 and two at $200. This is why in periods of rising prices, LIFO creates higher costs and lowers net income, which also reduces taxable income.

Which inventory method is used the most?

the FIFO method

First-In, First-Out (FIFO)

The oldest inventory products are sold first as per the FIFO method. The FIFO valuation method is the most commonly used inventory valuation method as most of the companies sell their products in the same order in which they purchase it.

Why FIFO method is better for inventory management?

FIFO is most successful when used in an industry in which the price of a product remains steady and the company sells its oldest products first. That's because FIFO is based on the cost of the first goods purchased, ignoring any increases or reductions in price for newer units.Aug 28, 2020

Which inventory method provides the highest profit and why?

Because FIFO has you subtract the cost of your oldest -- and therefore least expensive -- inventory from sales, your gross income is higher.

What are the 3 main inventory costing methods?

The method a company uses to determine it cost of inventory (inventory valuation) directly impacts the financial statements. The three main methods for inventory costing are First-in, First-Out (FIFO), Last-in, Last-Out (LIFO) and Average cost.

What are the 4 inventory costing methods?

The four main inventory valuation methods are FIFO or First-In, First-Out; LIFO or Last-In, First-Out; Specific Identification; and Weighted Average Cost.

When inventory prices are rising which inventory method will result in the lowest net income?

In a period of rising prices, which inventory method (LIFO, FIFO, Average cost) results in the lowest reported net income? LIFO pricing will produce the highest cost of goods sold and the lowest net income in a period of rising prices. You just studied 56 terms!

Which inventory method is best during inflation?

During inflation, FIFO has the potential to enhance the value of remaining inventory and bring higher net income.

When inventory prices are increasing the FIFO costing method will generally result in?

When inventory costs are increasing, the FIFO costing method will generally yield a cost of goods sold that is A) higher than cost of goods sold under the LIFO method. B) lower than cost of goods sold under the LIFO method.

How much did Smart sell to Truman?

On February 3, Smart Company sold merchandise in the amount of $1,800 to Truman Company, with credit terms of 1/10, n/30. The cost of the items sold is $1,240. Smart uses the perpetual inventory system and the gross method. Truman pays the invoice on February 8, and takes the appropriate discount.

How much did Ferguson sell to Tracey?

On July 1, Ferguson Company sold merchandise in the amount of $5,800 to Tracey Company, with credit terms of 2/10, n/30. The cost of the items sold is $4,000. Ferguson uses the perpetual inventory system and the gross method. On July 5, Tracey returns some of the merchandise.