5. Snuggle Corporation uses a periodic inventory system. When Snuggle's manager counts its inventory on December 31, 2021, he accidentally forgets to count one pile of blankets, resulting in 2021 ending inventory being understated by $160,000. The manager counts the December 31, 2022 inventory correctly. Which of the following statements is true related to Snuggle Corporation's 2021 and 2022 financial statements?

a. 2021 Cost of Goods Sold will be understated by $160,000.

b. 2022 Beginning Inventory will be overstated by $160,000.

c. 2022 Cost of Goods Sold will be understated by $160,000.

d. Both a and b are true.

e. All of the above are true.

6. In a period of rising prices, which of the following inventory methods generally results in the lowest balance sheet figure for inventory?

a. FIFO

b. LIFO

c. Weighted Average Cost

d. Cannot tell without more information

7. On January 29, 2022, Reno Corporation sold and shipped merchandise to Art, Inc. for $800,000 on credit. Goods were shipped FOB shipping point and arrived at Art warehouse on February 2. Which of the following statements is true?

a. Art, Inc. includes the $800,000 as part of its January 31 Inventory balance.

b. Reno Corporation includes the $800,000 as part of its January 31 Inventory balance.

c. The goods are in transit on January 31 so neither company includes the $800,000 as part of its January 31 Inventory balance.

d. Both companies include the $400,000 as part of their January 31 Inventory balances.