When Inventory Prices Are Rising, the FIFO Method Will Generally

question 19

Multiple Choice

When inventory prices are rising, the FIFO method will generally yield a gross margin that is:

• A)less than the weighted average method.
• B)equal to the gross margin of the weighted-average method.
• C)higher than the weighted-average method.
• D)FIFO does not generally cause a gross margin that is different from that of any other costing method.

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Definitions:

Current Assets

Current assets are assets that a company expects to convert into cash, sell, or consume within one year or within its operating cycle if longer than a year.

Vertical Analysis

A financial analysis method that compares various line items in a company's financial statements over a single period, expressing each item as a percentage of a base amount to assess relative size and structure.

Comparative Financial Statements

Financial statements that present financial information for different periods or dates side by side to facilitate comparison.

Corporations

Are legal entities that are separate and distinct from their owners. They have the ability to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets, and pay taxes.