Company C is identical to Company D in every respect except that Company C uses LIFO and Company D uses average costs. In an extended period of rising inventory costs, Company C's gross profit and inventory turnover ratio, compared to Company D's, would be:

	Gross Profit		Inventory Turnover
a.	higher		higher
b.	higher		lower
c.	lower		lower
d.	lower		higher

Multiple Choice

• Option C

• Option A

• Option B

• Option D

A company uses the periodic average cost method to account for inventory. For the year, the company had the following beginning inventory and purchases:

Beginning inventory on January 1	100 units	at	$	2,800	per unit
Purchase on March 1	400 units	at	$	3,000	per unit
Purchase on September 1	800 units	at	$	3,200	per unit

Sales for the year totaled 1,000 units, leaving 300 units on hand at the end of the year. The company reported ending inventory for $900,000. Which of the following is correct?

Multiple Choice

• The amount reported for ending inventory is correct.

• The amount reported for ending inventory cannot be determined with the information given because the amount depends on which of the 1,000 units were assumed to be sold.

• The amount reported for ending inventory is incorrect because the unit cost of ending inventory should be the average cost of the last 300 units purchased.

• The amount reported for ending inventory is incorrect because management used a simple average instead of weighted-average to calculate the unit cost of inventory for the year.

During periods when costs are rising and inventory quantities are stable, ending inventory will be:

Multiple Choice

• Higher under LIFO than FIFO.

• Higher under FIFO than LIFO.

• Higher under average cost than FIFO.

• Lower under average cost than LIFO.

Which of the following is false regarding the FIFO inventory method?

Multiple Choice

• Perishable goods often follow an actual physical flow that is consistent with the FIFO method assumptions.

• FIFO under a perpetual inventory system results in the same cost of goods sold as FIFO under a periodic inventory system.

• A company can choose to account for the flow of inventory using the FIFO method even if this doesn’t match the actual flow of its inventory.

• All of the other answer choices are true.

Mogul Company ships merchandise to Ski Outfit in a consignment arrangement. The arrangement specifies that Ski Outfit will attempt to sell the merchandise, and in return, Mogul will pay to Ski Outfit a 15% sales commission on any merchandise sold. During the year, Mogul ships inventory with a cost of $115,000 to Ski Outfit. By the end of the year, $88,000 of the merchandise has been sold to customers for a total of $121,400. What amount of inventory will Mogul report at year end?

Multiple Choice

• $6,400.

• $17,250.

• $0.

• $27,000.