In a Period of Increasing Prices, Which Inventory Cost Flow

question 114

Multiple Choice

In a period of increasing prices, which inventory cost flow method will result in the lowest gross profit?

• A) FIFO
• B) LIFO
• C) Average Cost
• D) Gross profit for the period will be the same under all assumptions.

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Definitions:

Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits.

Significant Influence

The capacity to participate in the financial and operating policy decisions of an investee, but not full control or joint control over those policies.

Income Tax Rate

The percentage of income that is paid to the government as tax, which can vary by income level, jurisdiction, and type of taxpayer.

Dividends Declared

The announcement by a company's board of directors of the intention to pay dividends to shareholders.