In a Period of Inflation (Prices Are Rising), Which Inventory

question 26

Multiple Choice

In a period of inflation (prices are rising) , which inventory cost formula will result in higher profit?

• A)FIFO
• B)Average cost
• C)Cost of goods sold for the period will be the same under both formulas.
• D)There would be no effect on profit.

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Definitions:

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the normal operating cycle of a business, whichever is longer.

Current Liabilities

Financial obligations a company is expected to settle within one year or within its normal operating cycle, whichever is longer.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed within one year or within the business's normal operating cycle if longer.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered or used, but not yet paid for.