In a period of rising prices, the inventory method that produces the highest ending inventory is

a) the average-cost method.

b) FIFO.
c) LIFO.
d) the method that results in the highest cost of goods sold.

Which cost flow assumption would be most appropriate when a relatively small number of
costly, easily distinguishable items are sold?
a) Specific identification
b) FIFO perpetual
c) FIFO periodic
d) Average

Which of the following is a reason why the specific identification method may be
considered ideal for assigning costs to inventory and cost of goods sold?

a) The potential for manipulation of net income is reduced.

b) There is no arbitrary allocation of costs.
c) The cost flow matches the physical flow.
d) Able to use on all types of inventory.

Assume that the proper correcting entries were made at December 31, 2021. By how
much will 2022 income before taxes be overstated or understated?

a) $3,000 understated
b) $16,500 overstated
c) $10,500 overstated
d) $15,000 overstated

If the beginning inventory is overstated at the end of 2022,

a) the current ratio will be overstated in 2022.

b) cost of goods sold will be understated in 2022.
c) retained earnings will be understated in 2022.
d) working capital will be understated in 2022.