Multiple Choice
Which of the following best describes the effect of using the LIFO inventory costing method during a period of rising prices on the company's financial statements?
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5. Inventory
Financial Statement Effects of Inventory Costing Methods
Multiple Choice
All of the following are inventory costing methods used under a periodic inventory system except:
A
Specific Identification
B
Weighted Average Perpetual
C
LIFO (Last-In, First-Out)
D
FIFO (First-In, First-Out)
Verified step by step guidance1
Understand the context: Inventory costing methods are techniques used to assign costs to inventory and cost of goods sold. These methods are applied under different inventory systems, such as periodic or perpetual systems.
Clarify the difference between periodic and perpetual inventory systems: A periodic inventory system updates inventory records at specific intervals (e.g., monthly or annually), while a perpetual inventory system continuously updates inventory records after each transaction.
Review the inventory costing methods listed: Specific Identification, Weighted Average Perpetual, LIFO (Last-In, First-Out), and FIFO (First-In, First-Out). Note that Weighted Average Perpetual is specific to the perpetual inventory system, not the periodic inventory system.
Identify the correct answer: Since Weighted Average Perpetual is not used under a periodic inventory system, it is the exception among the listed methods.
Conclude that the other methods (Specific Identification, LIFO, and FIFO) are valid inventory costing methods under a periodic inventory system, while Weighted Average Perpetual is not applicable.
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