Compare income, tax, and other effects of the inventory methods
Response to the following problem:
This exercise tests your understanding of the four inventory methods. List the name of the inventory method that best fits the description.
Assume that the cost of inventory is rising.
1. _____ Maximizes reported income
2. _____ Used to account for automobiles, jewelry, and art objects
3. _____ Results in a cost of ending inventory that is close to the current cost of replacing the inventory
4. _____ Generally associated with saving income taxes
5. _____ Enables a company to buy high-cost inventory at year-end and thereby decrease reported income and income tax
6. _____ Results in an old measure of the cost of ending inventory
7. _____ Provides a middle-ground measure of ending inventory and cost of goods sold
8. _____ Enables a company to keep reported income from dropping lower by liquidating older layers of inventory
9. _____ Writes inventory down when current replacement cost drops below historical cost
10. _____ Matches the most current cost of goods sold against sales revenue