19 The choice of inventory cost method FIFO LIFO WeightedAve

19. The choice of inventory cost method (FIFO, LIFO, Weighted-Average, or Specific Identification) affects which of the following amounts? A. Ending inventory B. Cost of goods sold. C. Gross profit. D. All of the above

Solution

The choice of inventory cost method (FIFO, LIFO, Weighted Average or Specific Identification ) affects the amounts of ending Inventory, Cost of Goods Sold and Gross Profit.
So the answer is D.) All of the above.
Explanation:-
Using different inventory valuation methods changes the cost of goods sold which will directly impacts the value of ending inventory. If LIFO method is used Cost of Goods Sold is higher and the value of ending inventory is lower, while using FIFO method Cost of goods sold in lower and value of ending inventory is higher and Gross profit is calculated on the basis of the cost of goods sold as posted in Income statement hence also impacts the Gross profit.