1. In an inflationary period, which cost flow method, LIFO or FIFO, will result in the larger amount of assets on the balance sheet? Explain
2. On December 31, 2014, the Grant Corporation estimated that $2,000 of its receivables might not be collected. On that date, the balance of Accounts receivable was $76,000. On February 1, 2015, Grant wrote off a delinquent account from a customer. Grant uses the allowance method of accounting for uncollectible accounts. Indicate whether each of the following statements is true or false.
1. The write-off entry on February 1, 2015 had no effect on Grant's total assets.
2. The write-off entry on February 1, 2015 decreased net income for 2015
3. The net realizable value of accounts receivable (after the appropriate adjusting entry on December 31, 2014) was $76,000.
4. The entry to write off the account on February 1, 2015 included recognition of uncollectible Accounts expense.
5. The adjusting entry on December 31, 2014 had no effect on Grant's total assets.
3. Indicate whether each of the following statements is true or false.
1. A US company can use LIFO for income tax purposes only if it also uses LIFO for financial reporting purposes.
2. The weighed average cost per unit is computed by dividing the total cost of goods purchased by the dollar amount of sales.
3. Under the FIFO method, the cost of goods sold for each sale is computed using the cost of the most recently acquired units.
4. In a period of rising inventory prices, use of FIFO allows a company to minimize its income tax expense.
5. To compute cost of goods sold under the weighed average method, it is necessary to first make a computation of the weighed average cost per unit.