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.

---

Definitions:

Book Value

The value of an asset as recorded on a company’s balance sheet, representing the cost of the asset minus accumulated depreciation.

Gain

An increase in equity resulting from the sale of an asset for more than its purchase price or carrying value, not related to the company's primary operations.

Accounts Receivable

Represents money owed to a company by its clients or customers for goods or services that have been delivered or used but not yet paid for.

Operating Activities

Business actions directly related to the production, sales, and delivery of a company's goods or services, reflected in its cash flow.