Accounting Procedures Allow a Business to Evaluate Their Inventory at LIFO

question 21

Multiple Choice

Accounting procedures allow a business to evaluate their inventory at LIFO (Last In First Out) or FIFO (First In First Out) . A manufacturer evaluated its finished goods inventory (in $1000) for five products both ways. Based on the following results, is LIFO more effective in keeping the value of his inventory lower? What is the decision at the 5% level of significance?

• A) Looking at the large P-value of.2019 we conclude LIFO is more effective.
• B) Reject the null hypothesis and conclude LIFO is more effective.
• C) Reject the alternate hypothesis and conclude LIFO is more effective.
• D) The large P-value of.2017 indicates that there is a good chance of getting this sample data when the two methods are in fact not significantly different, so we conclude that LIFO is not more effective.

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Definitions:

Debit Side

The Debit Side of an account records increases in assets or expenses and decreases in liabilities, equity, and income in double-entry bookkeeping.

Rules Of Debit

Rules governing the increase or decrease in account balances within the double-entry bookkeeping system, where debits typically increase assets or expenses and decrease liabilities, equity, and revenue.

Credit Side

The right side of an accounting entry, indicating increases in liabilities, revenues, and equity, and decreases in assets and expenses.

Normal Balance

The side (debit or credit) on which increases to an account are recorded, depending on the type of account.