In a Period of Rising Prices, the Inventory Method Which

question 5

Multiple Choice

In a period of rising prices, the inventory method which tends to give the highest reported net income is

• A) moving-average.
• B) first-in, first-out.
• C) specific identification.
• D) weighted-average.

---

Definitions:

Expense Basis

An accounting method where expenses are recognized and recorded when they are incurred, regardless of when the cash payment is made.

Encumbrance Accounting

An accounting method used mainly by governments that tracks commitments in their budgets, earmarking funds for specific future expenditures.

Purchase Order

A commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services.

Decentralized

A system or organization where decision-making authority is distributed among various levels rather than being concentrated at a single point.