Janise is a sole proprietor owning a small specialty store. the business records show that the cost of the stores individual inventory items have been steadily increasing. the cost of the end of the year inventory is 125,000 and the cost of the beginning of the year inventory was 150,000. Janis uses the lifo method of inventory valuation. which of the following statements are true?
a. Janine purchased more inventory during the year than sold during the same one year period
b. Janise would have a higher net income if she used the fifo method of inventory valuation instead of the lifo method
c Janise has apparently increased the volume of the items in her ending inventory as compared to the number of items in her beginning inventory
d. since the cost of the store inventory items is increasing Janine will have a smaller cost of goods sold amount on a lifo basis than on a fifo basis
e. none of the above
b
To determine which of the statements are true, let's go through the information provided step by step:
1. Janise uses the LIFO (Last In, First Out) method of inventory valuation. This means that the cost of the most recent inventory purchases is assumed to be the cost of goods sold first.
2. The cost of the end-of-year inventory is $125,000, and the cost of the beginning-of-year inventory was $150,000.
Now let's analyze each statement:
a. Janise purchased more inventory during the year than sold during the same one-year period.
To verify this statement, we need to compare the cost of the end-of-year inventory with the cost of the beginning-of-year inventory. Since the end-of-year inventory cost is lower than the beginning-of-year inventory cost (125,000 < 150,000), this statement is false.
b. Janise would have a higher net income if she used the FIFO (First In, First Out) method of inventory valuation instead of the LIFO method.
To determine this, we need more information about the inventory purchases and sales during the year. The information provided does not specify the actual quantities purchased and sold during the year, so we can't determine information about specific net income. Therefore, we cannot determine the accuracy of this statement.
c. Janise has apparently increased the volume of the items in her ending inventory as compared to the number of items in her beginning inventory.
The statement only deals with the cost of inventory, not the volume of items. Therefore, we cannot determine the accuracy of this statement based on the information provided.
d. Since the cost of the store inventory items is increasing, Janise will have a smaller cost of goods sold amount on a LIFO basis than on a FIFO basis.
This statement is true. Under the LIFO method, the most recent inventory costs are assumed to be used first. Since the cost of inventory items is increasing, using LIFO will result in higher costs being assigned to the cost of goods sold. Therefore, the cost of goods sold amount will be smaller on a LIFO basis compared to a FIFO basis.
Based on the above analysis:
The true statement among the options provided is:
d. Since the cost of the store inventory items is increasing, Janise will have a smaller cost of goods sold amount on a LIFO basis than on a FIFO basis.
Therefore, the correct answer is (d).