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Weighted Average Profits Method

In the period...

Question

In the periods of rising costs, which inventory cost flow method results in a higher cost of goods sold, a lower ending inventory, and a smaller net income?

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Solution

(A) Specific unit

(B) Weighted average

(C) FIFO

(D) LIFO

Answer:(D) LIFO

Explanation: The last in, first out (LIFO) is a technique used to represent inventory. Under LIFO, the expenses of the latest items bought (or created) are the first ones to be expensed.

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