Ace Company Is a Retailer Operating in an Industry That

question 172

Multiple Choice

Ace Company is a retailer operating in an industry that experiences inflation (rising prices) .Ace wants the most realistic ending inventory.Which inventory costing method should Ace consider using?

• A)Average-cost because all inventory costs will then represent an average amount.
• B)Specific identification is the most realistic method because it involves the actual costs.
• C)LIFO because ending inventory represents the earliest costs.
• D)FIFO because ending inventory represents the latest costs.

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Definitions:

Retrospective Application Method

A method of applying new accounting policies to transactions, other events, and conditions as if the new policies had always been in place.

Financial Statements

Reports summarizing the financial performance and position of a company, including the income statement, balance sheet, and cash flow statement.

Company's Management

The group of individuals who operate at various levels within a company and are responsible for making decisions, implementing strategies, and running day-to-day operations.

Interest Receivable

An accounting term referring to the interest income that has been earned but not yet received in cash.