During a Period of Continuing Inflation, Which Inventory Cost Flow

question 144

Multiple Choice

During a period of continuing inflation, which inventory cost flow alternative usually results in the highest reported net income?

• A) FIFO
• B) LIFO
• C) Average cost
• D) All of these result in the same reported net income

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Definitions:

Short-term Borrowing

Loans or debt obligations that are expected to be paid back within a short period, typically less than one year, often used for operational expenses.

Carrying Costs

Expenses associated with holding or storing inventory over a period of time, including insurance, storage, and depreciation.

Current Assets

Assets that are expected to be converted into cash, sold, or consumed in the business within one year or within the normal operating cycle.

Investment

The allocation of resources, such as time, money, or effort, in expectation of future benefits or returns.