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:

Plant Assets

Long-term tangible assets used in the production of goods or services.

Capital Expenditures

Original cost of an asset as well as additions or enlargements, extraordinary repairs, and betterments.

Budgeting

The process of creating a plan to spend your money, allocating future income towards expenses, savings, and debt repayment.

Equipment

Tangible property used in operations, such as machinery or computers, which has a useful life beyond a single reporting period.