For Each Item Listed in 1 Through 7, Place the Letter

question 11

Essay

For each item listed in 1 through 7, place the letter (a through e) of the accounting effect in the space provided. You may use each letter more than once or not at all.
____ 1. During a period of increasing inventory and rising prices, a company decides to use FIFO instead of LIFO.
____ 2. During a period of increasing inventory and rising prices, a company decides to use averaging instead of FIFO.
____ 3. During a period of increasing inventory and increasing prices, a company uses the LIFO method, which creates the largest cost of goods sold.
____ 4. A company applies lower-of-cost-or-market for valuing ending inventory when market price is less than cost.
____ 5. A company applies lower-of-cost-or-market for valuing ending inventory when cost is less than market price.
____ 6. During an extended period of constant prices, a company adopts LIFO instead of FIFO.

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Definitions:

Mere Exposure Effect

The psychological phenomenon by which people tend to develop a preference for things merely because they are familiar with them.

Unfamiliar Stimulus

A new or unknown stimulus that has not been previously encountered by an individual, often triggering a learning or adaptation process.

Reward Theory

A psychological principle suggesting that behaviors are motivated by the rewards they produce.

Mere Exposure Effect

An occurrence in psychology where people begin to favor things just because they have been exposed to them before.