Jasper Owns a Small Retail Store as a Sole Proprietor

question 17

Multiple Choice

Jasper owns a small retail store as a sole proprietor.The business records show that the cost of the store's inventory items has been steadily increasing.The cost of the end of the year inventory is $200,000 and the cost of the beginning of the year inventory was $250,000.Jasper uses the FIFO method of inventory valuation.Which of the following statements is true?

• A)Jasper purchased more inventory during the year than he sold during the same one-year period.
• B)Jasper would have a higher net income if he used the LIFO method of inventory valuation instead of the FIFO method.
• C)Jasper has apparently decreased the volume of items in his ending inventory as compared to the number of items in his beginning inventory.
• D)Since the cost of the store's inventory items is increasing, Jasper will have a greater cost of goods sold figure under FIFO than LIFO.
• E)None of the above.

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Definitions:

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since its purchase.

Accelerated Depreciation

A method of depreciation that allows a larger portion of an asset's cost to be deducted in the early years of useful life.

Freight Costs

The expenses incurred to transport goods from one location to another.

Useful Life

The estimated duration of time that an asset is expected to be functional and economically viable for its intended purpose.