In an inflationary period, which inventory cost flow method will produce the largest amount of total assets on the balance sheet? Explain.
In an inflationary period, FIFO will produce the largest amount of total assets. (Refer to the discussion for Question 31.) The unsold items, inventory, are the highest cost items. Consequently, assuming rising prices, FIFO flow produces a higher inventory amount than would be the case under a LIFO flow.
More Questions Accounting Chapter 5:
- What is the difference between the flow of costs and the physical flow of goods?
- In an inflationary period, which inventory cost flow method will produce the largest amount of total assets on the balance sheet? Explain.
- In an inflationary period, which inventory cost flow method will produce the highest net income? Explain.
- What are some advantages and disadvantages of using the FIFO method of inventory valuation?
- What are some advantages and disadvantages of the specific identification method of accounting for inventory?
- What is the effect on the accounting equation of recognizing uncollectable accounts expense?
- What is the net realizable value of receivables?
- What is the difference between accounts receivable and notes receivable?