A company that is under extreme pressure to meet its earnings goals would be more likely to use the FIFO method of inventory costing. less likely to report its pro forma income in its annual report. more likely to engage in channel stuffing. O less likely to use the LIFO method of inventory costing.

A company that is under extreme pressure to meet its earnings goals would be more likely to use the FIFO method of inventory costing. less likely to report its pro forma income in its annual report. more likely to engage in channel stuffing. O less likely to use the LIFO method of inventory costing.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

Problem 8DQ: A high inventory turnover ratio provides evidence that a company is having problems with stockouts...

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Similar questions

A high inventory turnover ratio provides evidence that a company is having problems with stockouts and disgruntled customers. Do you agree? Explain.
Which of the following statements regarding the lower of cost and net realizable value (LCNRV) rule is true? a.The LCNRV rule is an application of the cost principle. b.When the net realizable value of inventory drops below the cost of inventory, an adjustment is made to decrease inventory to its net realizable value and decrease income. c.If a company uses the LCNRV rule, there is no need to use a cost flow assumption such as FIFO, or weighted average cost. d.When the net realizable value of inventory is above the cost of inventory, an adjustment is made to increase inventory to its net realizable value and increase income.
A company follows the LIFO inventory method and is experiencing rising costs. What impact will this have on its financial statements during a period of increasing prices? a b C d Higher cost of goods sold and lower net income Lower cost of goods sold and higher net income. Lower inventory turnover and higher gross profit margin. Higher inventory turnover and lower gross profit margin.
A firm that uses LIFO accounting for inventory in times of rising investory costs will always report lower profit margins than if it used FIFO. Is this correct?
Which of the following statement is not valid as it applies to inventory costing method? A) If inventory quanities are to be maintained, part of the earning must be invested (plowed back) in inventories when FIFO is used during a period of rising prices. B) LIFO tends to smooth ou the net income patterns by matching currents cost of goods sold with current revenue, when inventories remain at costant quantities. C) When a firm using the LIFO method fails to maintain its usual inventory position (reduces stock on hand below customary levels), there may be a matching of old cost with current revenue. D) The use of FIFO permits some control by managment over the amount of net income for a period through controlled purchase, which is not true with LIFO.
Which statements below are true? 1. LCM and LCNRV may be applied by individual products, by product category or by total inventory. 2. A firm that wants to minimize the negative impact of inventory write-down on net income should apply LCM or LCNRV by individual products. 3. If inventory write-down is usual and not substantial, a firm should debit "Loss on inventory write-down” and credit "Inventory". 4. LCM and LCNRV applied by total inventory will result in higher value of inventory and lower inventory write-down than by individual products, by product category. 5. If inventory write-down is unusual and substantial, a firm should debit "Cost of good sold" and credit "Inventory".
During a period of rising inventory costs and stable output prices, describe how net income and total assets would differ depending upon whether LIFO or FIFO is applied. Explain how your answer would change if the company is experiencing declining inventory costs and stable output prices.
A company embarked on a lean initiative and was able to significantly reduce of levels of inventory. Which of the following would not occur as a result? Decrease in overall time to produce the part Highlighting of other problems which the inventory may be masking Reducing waste of space and excess containers Decrease in inventory carrying costs. None of the above. (All would occur.
Overstating ending inventory in the current year causes net income in the current year to be overstated. Select one: True False Using the weighted-average cost method, the average cost of inventory is calculated as the average unit cost of inventory purchased during the year. Select one: O True O False During periods of rising costs, FIFO generally results in a higher cost of goods sold. Select one: O True False During periods of rising costs, LIFO generally results in a higher ending inventory balance. Select one: O True O False
Like many technology companies, TechnoTools operates in an environment of decliningprices. Its reported profits will tend to be highest if it accounts for inventory using the:A. FIFO method.B. LIFO method.C. weighted average cost method.
During a period of rising inventory prices, a company's cost of goods sold would be higher using the LIFO cost flow method than with FIFO. True or False True False
Under the LIFO cost flow assumption during a period ofinflation, which of the following is false? A. Cost of goods sold will be lower than under FIFO B. Gross margin will be lower than under FIFO C. Income tax expense will be lower than under FIFO D. Ending inventory will be lower than under FIFO