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Inventory valuation

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Quest 1. Most methods of pricing inventories are in accord with generally accepted accounting principles and generally are permissible for income tax purposes. One method that does not fall into this category is
a. moving average.
b. weighted average.
c. LIFO.
d. variable costing.

Quest 2. David Engel's company has been using the FIFO cost method of inventory valuation since it was started 10 years ago. Its 2005 ending inventory was $120,000, but it would have been $95,000 if LIFO had been used. Thus, if LIFO had been used, this company's income before taxes would have been
a. $25,000 less in 2005
b. $25,000 less over the 10-year period.
c. $25,000 greater over the 10-year period.
d. $25,000 greater in 2005.

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Answers 2 Multiple choice questions on valuing inventory.

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1) Most methods of pricing inventories are in accord with generally accepted accounting principles and generally are permissible for income tax purposes. One method that does not fall into this category is

a. moving average.
b. weighted average.
c. LIFO.
d. variable costing.

Answer: d. variable costing.

In the direct (or variable) method, only ...

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