1. Under the periodic inventory method, if merchandise is sold for cash on December 31 and is recorded as a sale but is not shipped (and thus is included in the ending inventory count), the financial statements will:

a. Understate liabilities

b. Understate net income

c. Overstate assets

d. Understate assets

2. Which of the following would be true if inventory costs were increasing?

a. FIFO would result in lower net income and higher ending inventory amounts than would LIFO

b. LIFO would result in lower net income and lower ending inventory amounts than would FIFO

c. None of these would be true

d. LIFO would result in a lower net income amount but a higher ending inventory amount than would FIFO