If Purchase Prices Are Falling,which Cost Flow Assumption Provides the Highest

question 39

Multiple Choice

If purchase prices are falling,which cost flow assumption provides the highest cost of goods sold?

• A) FIFO
• B) annual weighted average
• C) moving weighted average
• D) LIFO.

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Definitions:

Physical Inventory

The process of counting by hand the actual inventory available in a business at a specific time, typically done periodically.

Cost of Inventory

The total expense to purchase and manage inventory stocks, including purchase costs, shipping, handling, and storage.

Perpetual Inventory System

An accounting system that continuously updates inventory records and cost of goods sold after each purchase or sale.

Closing Entry

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to permanent ones, thereby preparing the books for the next period.