During a Year of Rising Prices and Increasing Inventory, Which

question 95

Multiple Choice

During a year of rising prices and increasing inventory, which cost flow assumption would measure the largest inventory turnover ratio?

• A)FIFO
• B)LIFO
• C)Average
• D)The inventory turnover ratio is not sensitive to inventory cost flow assumptions.

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Definitions:

GAAP

Generally Accepted Accounting Principles, which are a set of accounting standards and practices used to prepare financial statements.

Financial Instruments

Contracts that give rise to both a financial asset of one entity and a financial liability or equity instrument of another entity.

Discounted Note

A promissory note that is sold or issued for less than its face value and upon maturity pays out its full face value, effectively generating interest for the holder.