If One Were Applying the FIFO Retail Method in a Period

question 150

Multiple Choice

If one were applying the FIFO retail method in a period of rising prices to estimate the ending inventory the dollar amount would be:

• A) the same as the average cost method.
• B) lower than the average cost method.
• C) higher than the average cost method.
• D) the same cost ratio as was used for the opening inventory.

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Definitions:

Preferred Shares

A class of ownership in a corporation that has a higher claim on its assets and earnings than common shares, often with fixed dividends and no voting rights.

Basic Earnings

Basic earnings typically refers to the net income of a company, calculated before any effects of preferred dividends, divided by the weighted average number of common shares outstanding.

Net Income

The total profit of a company after all expenses, taxes, and costs have been subtracted from total revenue, indicating the company's financial performance over a period.

Common Shares

Equity securities that represent ownership in a company, entitling holders to vote at shareholder meetings and receive dividends.