When Prices Are Rising, Which Method of Inventory, If Any

question 40

Multiple Choice

When prices are rising, which method of inventory, if any, will result in the lowest relative net cash outflow (including the effects of taxes, if any) ?

• A)weighted average.
• B)FIFO.
• C)LIFO.
• D)None of these; inventory methods cannot affect cash flows.

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Definitions:

Credit Total

The sum of all credit entries in an account or financial transaction.

Net Income

The final profit of a business, calculated by removing all expenditures, taxes, and financial losses from the total income.

Adjusted Trial Balance

A list of all accounts and their balances after adjustments are made, used to prepare financial statements.

Income Statement

A financial statement that reports a company's financial performance over a specific accounting period, detailing revenues and expenses to show net profit or loss.