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
I have noticed your post many times now, and you are probably wondering why nobody is answering it.
Personally I am not familiar with the king of mathematics you are dealing with. I have no idea what the "lifo method" is. Secondly, I am not in the US, so I am not familar with the methods used there.
Most tutors on here will respond to questions on topics with which they are familiar.
We are all volunteers and most of us are not on this webpage at a regular time or on a regular basis.
To answer this question, let's break down the given information and evaluate each statement:
Statement a: Janise purchased more inventory during the year than sold during the same one-year period.
To determine if this statement is true, we need to compare the cost of the end of the year inventory (125,000) to the cost of the beginning of the year inventory (150,000). Since the cost of the end of the year inventory is lower than the beginning of the year inventory, it suggests that Janise sold more inventory than she purchased. Therefore, statement a is false.
Statement b: Janise would have a higher net income if she used the FIFO method of inventory valuation instead of the LIFO method.
To evaluate this statement, we need to understand the LIFO (Last-In, First-Out) and FIFO (First-In, First-Out) methods of inventory valuation. The LIFO method assumes that the most recent inventory purchases are sold first, while the FIFO method assumes that the earliest inventory purchases are sold first. Since the cost of inventory has been increasing, the LIFO method would result in a higher cost of goods sold, leading to lower net income compared to using the FIFO method. Therefore, statement b is true.
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 given information does not provide any data about the volume or number of items in Janise's inventory. Therefore, we cannot determine if statement c is true or false based on the given information.
Statement 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 false. As mentioned earlier, the LIFO method assumes that the most recent inventory purchases are sold first. Since the cost of inventory has been increasing, using the LIFO method would result in assigning the higher cost items to the cost of goods sold. Hence, Janise will have a higher cost of goods sold on a LIFO basis compared to the FIFO basis, leading to a smaller net income.
In conclusion, from the given statements, only statement b is true. Therefore, the correct answer is b.