When Inventory Prices Are Increasing, the FIFO Costing Method Will

question 66

Multiple Choice

When inventory prices are increasing, the FIFO costing method will generally yield a cost of goods sold that is:

• A) higher than cost of goods sold under the LIFO method.
• B) lower than cost of goods sold under the LIFO method.
• C) equal to the gross profit under the LIFO method.
• D) equal to cost of goods sold under the LIFO method.

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Definitions:

Sinking Funds

A type of savings account or fund that is set up to repay debt or an outstanding loan, making periodic payments into the fund for this purpose.

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell the products, and collect cash from the sales.

Maturity Value

The total amount payable to an investor at the end of a bond's term, including both the principal and the interest.

Bonds

Fixed-income investments representing loans made by an investor to a borrower, typically corporate or governmental.