Accounting: Tools for Business Decision Making, 5th Edition

Published by Wiley
ISBN 10: 1118128168
ISBN 13: 978-1-11812-816-9

Chapter 6 - Reporting and Analyzing Inventory - Questions: 12

Answer

The cost flow methods used are - 1. Knott Company is using FIFO method 2. Quirk Company is using LIFO method 3. Knott Company will report higher gross profit, as they are using FIFO method

Work Step by Step

1.As the units in stock will be units purchased recently. 2. As the units in stock will be units purchased in earlier period, when the prices were low. 3. In the period of rising price, FIFO produces a higher gross profit because of lower unit costs.
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