During a Year of Decreasing Prices and Decreasing Inventory, Which

question 111

Multiple Choice

During a year of decreasing prices and decreasing inventory, which cost flow assumption would measure the greatest net income?

• A) FIFO
• B) LIFO
• C) Averaging
• D) Both a and c are correct.

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Definitions:

Revenue Recognition Standards

Guidelines that dictate how and when revenue should be recorded and recognized on the financial statements to ensure consistency and comparability across different businesses.

Sales Discounts

Reductions in the price of goods or services offered to customers to prompt early payment or bulk purchases.

Sales Returns

Goods returned by the buyer to the seller for a refund or credit, often due to issues like defects or dissatisfaction.

Adjusting Entries

Journal entries made in accounting at the end of a reporting period to allocate income and expenditures to the period in which they actually occurred.