Double Entry Door's Suppliers Maintained Very Stable Prices for Many

question 148

Multiple Choice

Double Entry Door's suppliers maintained very stable prices for many years, but Minnie has noticed that the cost of doors has been rising steadily for the past few years. She is concerned that, given the company's current accounting methods of basing its cost on the most recent doors purchased, this will result in a much lower net income than in the past. The most likely reason for her concern is that Double Entry has apparently been using

• A) the FIFO inventory valuation method to determine its cost of goods sold.
• B) a great deal of equity financing to purchase the doors.
• C) the LIFO inventory valuation method to determine its cost of goods sold.
• D) a depreciation method based on the average value of inventory.