1: In a period of declining prices, which method gives (1) the highest cost of ending inventory and (2) the highest gross profit?

2: List two advantages of weighted average costing over FIFO and LIFO costing. (2) A company makes it a practice to sell all of its old inventory first. Does the company have to use FIFO costing for accounting purposes? Explain.

3: List 3 differences between a single step income statement and a multi-step income statement. (2) Why is gross profit information considered to be useful to financial statement readers?

4: Under what circumstances would an adjusting entry be required at the end of the year for merchandise Inventory?