Ace Company Is a Retailer Operating in an Industry That

question 230

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 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:

Reserves

Funds or materials set aside for future use or to cover unexpected emergencies; in banking, refers to the amount of money banks are required to hold as a safety measure.

Government Bond

A debt security issued by a government to support government spending, often considered a low-risk investment.

Market Rate

The prevailing interest rate available in the marketplace for loans or deposits of a specific maturity.

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage rate.