During Times of Inflation, Which of These Inventory Accounting Methods

question 11

Multiple Choice

During times of inflation, which of these inventory accounting methods is best for cash flow?

• A) LIFO, because the most expensive goods are recorded as being sold first, resulting in a higher cost of goods sold and a lower reported net income.
• B) Specific identification, because it correctly identifies the actual item sold and so the actual cost is recorded on the income statement.
• C) Weighted average, because it smoothes the reported cost of goods sold over time.
• D) It doesn't matter which you use since cash flow is unaffected by the choice of inventory identification method.
• E) FIFO, because the cheapest goods are recorded as being sold first, resulting in lower cost of goods sold and higher reported net income.

---

Definitions:

Ethical Mindfulness

An approach to ethics that emphasizes awareness and consideration of ethical implications and consequences in decision-making.

Conscious Decision

A choice made with full awareness and thoughtful consideration, as opposed to actions taken impulsively or without deliberation.

Amoral Manager

An individual who makes decisions without considering the ethical implications, focusing solely on business outcomes.

Ethical Role Models

Individuals whose behaviors, actions, and decisions serve as examples of ethical conduct and principles.