The Two Most Widely Used Methods for Determining the Cost

question 46

Multiple Choice

The two most widely used methods for determining the cost of inventory are

• A) FIFO and LIFO
• B) FIFO and average
• C) LIFO and average
• D) gross profit and average

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Definitions:

Simple Interest

Simple interest is a method of calculating the interest charge on a loan or investment based on the original principal amount and not on accumulated interest.

Discount

A reduction applied to the normal cost of goods or services, or in finance, the process of determining the present value of future cash flows by applying a discount rate.

Compound Interest

Interest that accrues on the principal amount as well as on the accrued interest from earlier periods, for either a deposit or a loan.

Simple Interest Rate

The percentage of interest paid on the original principal amount of a loan or investment, not compounding over time.