Inventory Cost Method for Earl Co.
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Earl Co. was formed on January 2, 2004, to sell a single product. Over a two-year period, Earl's acquisition costs have increased steadily. Physical quantities held in inventory were equal to three months' sales at December 31, 2004, and zero at December 31, 2005. Assuming the periodic inventory system, the inventory cost method which reports the highest amount of each of the following is
Inventory Cost of Sales
December 31, 2004 2005
a. LIFO FIFO
b. LIFO LIFO
c. FIFO FIFO
d. FIFO LIFO
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Solution Summary
The solution explains which inventory cost method reports the highest amount of inventory and cost of sales.
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Since the acquistion costs have increased steadily, FIFO inventory would be highest at Dec ...
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