If a Company Uses Periodic Inventory and FIFO When Prices

question 27

Multiple Choice

If a company uses periodic inventory and FIFO when prices are falling, the effect will:

• A)reduce cost of goods sold.
• B)increase the inventory ending balance on the balance sheet.
• C)reduce the gross margin.
• D)increase the gross margin.

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Definitions:

Depreciation

The process by which capital assets decrease in value over time due to wear and tear or obsolescence.

Price Level

The mean cost across the full breadth of goods and services currently produced in the economy.

Production

The process of creating goods or services by combining labor, capital, and natural resources.

GDP

Gross Domestic Product, a measure of a country's economic performance, representing the total value of all goods and services produced over a specific time period.