Of the Three Cost-Flow Assumptions, When Inventory Costs Have Been

question 16

Multiple Choice

Of the three cost-flow assumptions, when inventory costs have been rising and inventory amounts increasing, LIFO results in balance sheet figures that are _____, cost of goods sold will _____, and _____ reported net income

• A)closest to current cost, be out of date, highest
• B)out of date, closest to current cost, highest
• C)closest to current cost, be out of date, lowest
• D)out of date, closest to current cost, lowest
• E)closest to current cost, closest to current cost, highest

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Definitions:

Profitability

The degree to which a business or activity yields profit or financial gain, measured by the ratio of profit to revenues or investment.

Demand Curve

A graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period, typically downward sloping.

Competitive Firm

A company that operates in a market where it must compete with other firms for customers.