If Inventory Is Being Valued at Cost and the Purchase

question 83

Multiple Choice

If inventory is being valued at cost and the purchase price is steadily falling, which method of costing will yield the largest net income?

• A) average cost
• B) LIFO
• C) FIFO
• D) weighted average

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Definitions:

Open Market Purchase

A monetary policy tool where the central bank buys government securities from the market in order to expand the money supply.

Money Supply

The total financial assets present within an economy, inclusive of cash, coins, and the amounts present in checking and savings accounts, at a certain point.

Reserve Requirement Ratio

The fraction of deposits that banks are required to hold in reserve, either in their vaults or with the central bank, not used for loans.

Checkable Deposits

Deposits in bank accounts that can be withdrawn using checks, debit cards, or digital transactions, comprising a significant part of the money supply.