WILEY TEST BANK QUESTIONS AND
ANSWERS WITH VERIFIED SOLUTIONS
100% CORRECT!!!
Given stable inventory quantities and rising prices, use of LIFO will most likely:
Overstate net income.
Understate net income.
Understate inventory. - ANSWER✔✔ c
Given stable inventory quantities and rising prices, use of LIFO will understate
inventory. COGS and net income will be valued properly by using LIFO.
In a period of rising prices and stable inventory quantities, which of the following
is most likely?
Profitability ratios are lower under FIFO.
Solvency ratios are higher under FIFO.
Activity ratios are lower under FIFO. - ANSWER✔✔ C
In a period of rising prices and stable inventory quantities, use of FIFO results in
lower activity ratios, lower solvency ratios, and higher profitability ratios.
Given stable inventory quantities and falling prices, use of LIFO will least likely:
Result in higher net income compared to FIFO.
Overstate net income.
Overstate inventory. - ANSWER✔✔ B
, Given stable inventory quantities and falling prices, use of LIFO will not overstate
net income. Current replacement costs will be reflected in COGS, which would
result in an accurate value for net income.
In a period of falling prices and stable inventory quantities, which of the following
is least likely?
The current ratio is higher under LIFO.
Solvency ratios are higher under LIFO.
The inventory turnover ratio is lower under LIFO. - ANSWER✔✔ B
In a period of falling prices and stable inventory quantities, use of LIFO results in
lower COGS, higher net income, higher equity, and therefore, lower solvency
ratios.
When converting from LIFO TO FIFO.....EI FIFO = - ANSWER✔✔ EI LIFO +
LR ending
When converting from LIFO TO FIFO.....COGS FIFO = - ANSWER✔✔ COGS
LIFO −(Change in LR during the year)
When converting from LIFO TO FIFO..... net income after tax under FIFO will be
greater than LIFO net income after tax by: - ANSWER✔✔ Change in LIFO
Reserve × (1 − Tax Rate)
When converting from LIFO to FIFO assuming rising prices:
Equity (retained earnings) increases by: - ANSWER✔✔ LIFO Reserve × (1 − Tax
Rate)
ANSWERS WITH VERIFIED SOLUTIONS
100% CORRECT!!!
Given stable inventory quantities and rising prices, use of LIFO will most likely:
Overstate net income.
Understate net income.
Understate inventory. - ANSWER✔✔ c
Given stable inventory quantities and rising prices, use of LIFO will understate
inventory. COGS and net income will be valued properly by using LIFO.
In a period of rising prices and stable inventory quantities, which of the following
is most likely?
Profitability ratios are lower under FIFO.
Solvency ratios are higher under FIFO.
Activity ratios are lower under FIFO. - ANSWER✔✔ C
In a period of rising prices and stable inventory quantities, use of FIFO results in
lower activity ratios, lower solvency ratios, and higher profitability ratios.
Given stable inventory quantities and falling prices, use of LIFO will least likely:
Result in higher net income compared to FIFO.
Overstate net income.
Overstate inventory. - ANSWER✔✔ B
, Given stable inventory quantities and falling prices, use of LIFO will not overstate
net income. Current replacement costs will be reflected in COGS, which would
result in an accurate value for net income.
In a period of falling prices and stable inventory quantities, which of the following
is least likely?
The current ratio is higher under LIFO.
Solvency ratios are higher under LIFO.
The inventory turnover ratio is lower under LIFO. - ANSWER✔✔ B
In a period of falling prices and stable inventory quantities, use of LIFO results in
lower COGS, higher net income, higher equity, and therefore, lower solvency
ratios.
When converting from LIFO TO FIFO.....EI FIFO = - ANSWER✔✔ EI LIFO +
LR ending
When converting from LIFO TO FIFO.....COGS FIFO = - ANSWER✔✔ COGS
LIFO −(Change in LR during the year)
When converting from LIFO TO FIFO..... net income after tax under FIFO will be
greater than LIFO net income after tax by: - ANSWER✔✔ Change in LIFO
Reserve × (1 − Tax Rate)
When converting from LIFO to FIFO assuming rising prices:
Equity (retained earnings) increases by: - ANSWER✔✔ LIFO Reserve × (1 − Tax
Rate)
