In a Period of Inflation (Prices Are Rising), Which Inventory

question 30

Multiple Choice

In a period of inflation (prices are rising) , which inventory cost formula will result in higher net income?

• A) FIFO
• B) average cost
• C) Cost of goods sold for the period will be the same under both formulas.
• D) There would be no effect on net income.

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Definitions:

Faulting

The process by which rocks break and move along a fracture plane in the Earth's crust, often associated with seismic activity.

Earthquake

A sudden and violent shaking of the ground, sometimes causing great destruction, as a result of movements within Earth's crust or volcanic action.

Refracted

A process by which the direction of a wave or ray changes as it passes obliquely from one medium into another in which its speed is different.

Reflected

The process whereby light or other waves are bounced back from a surface without being absorbed.