Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

Financial Accounting

4. Merchandising Operations

Cost of Goods Sold - Perpetual Inventory vs. Periodic Inventory

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Multiple Choice

Which of the following inventory methods would likely result in the lowest ending inventory during a period of rising prices?

FIFO under the periodic inventory system

LIFO under the periodic inventory system

FIFO under the perpetual inventory system

Weighted average under the periodic inventory system

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Verified step by step guidance

Understand the key inventory methods: FIFO (First-In, First-Out), LIFO (Last-In, First-Out), and Weighted Average. Each method determines how inventory costs are assigned to Cost of Goods Sold (COGS) and ending inventory.

Recognize the impact of rising prices on inventory valuation. In a period of rising prices, newer inventory costs are higher than older inventory costs.

Analyze the LIFO method under the periodic inventory system. LIFO assumes that the most recent (higher-cost) inventory is sold first, leaving older (lower-cost) inventory as ending inventory. This results in the lowest ending inventory value during rising prices.

Compare LIFO to FIFO under the periodic inventory system. FIFO assumes that the oldest (lower-cost) inventory is sold first, leaving newer (higher-cost) inventory as ending inventory, which results in a higher ending inventory value compared to LIFO.

Evaluate Weighted Average under the periodic inventory system. This method averages all inventory costs, resulting in an ending inventory value that is typically between the values produced by FIFO and LIFO during rising prices.