Benson Company Purchased Two Identical Inventory Items

question 54

Multiple Choice

Benson Company purchased two identical inventory items. The item purchased first cost $14.00, and the item purchased second cost $15.00. Benson sold one of the items for $24.00. Which of the following statements is true?

• A)Ending inventory will be lower if Benson uses weighted average than if FIFO were used.
• B)Cost of goods sold will be higher if Benson uses FIFO than if weighted average were used.
• C)The dollar amount assigned to ending inventory will be the same no matter which cost flow method is used.
• D)Gross margin will be higher if Benson uses LIFO than it would be if FIFO were useD.If Benson uses weighted average, ending inventory will be $14.50. If the company uses FIFO, ending inventory will be $15.00.

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Definitions:

Owner's Drawing

Refers to the withdrawal of cash or other assets from a business by the owner for personal use.

Owner's Investment

The total amount of money or assets that an owner puts into his or her business.

Equipment

Physical assets used in the operation of a business to produce goods or services.

Monthly Rent

Regular payment made for the use of property or land, agreed upon on a monthly basis.