Question

1For the revenue process which of the following document sequences is correct?

Customer order, sales order, packing slip, bill of lading

Sales order, packing slip, customer order, bill of lading

Customer order, bill or lading, sales order, packing slip

Customer order, packing slip, sales order, bill of lading

2

During the current year, ending inventory was higher under the LIFO method than under the FIFO method. Which of the following statements about price changes is true?

Prices were unchanged.

Prices were increasing.

Unable to determine from the information given

Prices were decreasing.

3

In times of rising prices, ______ generally result(s) in the ______ cost of goods sold.

FIFO, higher

FIFO, lower

LIFO, lower

LIFO and FIFO, same

Answer 1

• For the revenue process which of the following document sequences is correct?

Correct Answer

Customer order, sales order, packing slip, bill of lading

• During the current year, ending inventory was higher under the LIFO method than under the FIFO method. Which of the following statements about price changes is true?

Correct Answer	Prices were decreasing.
	This is because, under LIFO, ending inventory is valued at cost of earliest purchases. If that cost is high it will give higher ending inventory value. Since earliest costs are high, and ending inventory value is more in LIFO than FIFO, the price must have been decreasing.

• In times of rising prices, ______ generally result(s) in the ______ cost of goods sold.

Correct Answer

FIFO, lower

This is because, under FIFO, cost of goods sold is taken from the earliest purchases rate. In period of rising prices, the latest purchases will be at higher price but cost of goods sold will be valued at earliest purchases when prices were not that increased. Hence, cost of goods will be lower.