Choose the Statement Which Is Correct

question 3

Multiple Choice

Choose the statement which is correct. Assume that inventory prices are rising.

• A)The LIFO method gives the highest closing inventory figure in the statement of financial position.
• B)The FIFO method gives the highest closing inventory figure in the statement of financial position.
• C)The FIFO method gives the lowest closing inventory figure in the statement of financial position.
• D)The LIFO method gives the lowest figure for cost of sales.

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Definitions:

Units-Of-Activity

A depreciation method that allocates expense based on the actual usage or activity level of an asset.

Depreciation Method

A systematic approach used to allocate the cost of a tangible asset over its useful life, such as straight-line or declining balance methods.

Double-Declining-Balance

A method of accelerated depreciation which doubles the straight-line depreciation rate.

Straight-Line Rate

The straight-line rate is a method of depreciation that evenly spreads the cost of an asset over its useful life.