chapter 4

Question 1

Provide highest net income

Answer 1

FIFO

Question 2

Provide highest ending inventory

Answer 2

FIFO

Question 3

Provide lowest income tax expense

Answer 3

LIFO

Question 4

Provides most stable earning over the number of years

Answer 4

Average cost

Question 5

Finding total cost of goods sold

Answer 5

Beg inv - discount + freight-in + purchases - returns&allowance = GAS - ending inventory = COGS

Question 6

A merchandising company reports gross profit but a service company does not

Answer 6

TRUE

Question 7

Under a periodic inventory system, a company determine the cost of goods sold each time a sale occurs

Answer 7

FALSE

Question 8

A service company is likely to use accounts receivable but a merchandising company is not likely to do so

Answer 8

FALSE

Question 9

Periodic system

Answer 9

Journalizes accounting payable and purchase

Question 10

Perpetual system

Answer 10

Journalizes inventory and account payable

Question 11

In a perpetual inventory system

Answer 11

Determined from the records when the sale occurs

Question 12

Periodic inventory system

Answer 12

Determined only at the end of an accounting period