Final answer:
Among the statements presented, only the first is true: inventory methods are indeed assumed cost flows that do not have to correspond with the actual physical flow of goods.
Step-by-step explanation:
The student question pertains to the principles of inventory accounting methods recognized under Generally Accepted Accounting Principles (GAAP). When addressing the true statements, it's important to analyze each one:
- The inventory method is an assumed cost flow and does not have to correspond with the actual physical flow of goods.
- A grocery store may use the last-in, first-out (LIFO) inventory method.
- First-in, last-out is one of the titles of inventory methods allowed by GAAP.
- The inventory methods apply to perpetual inventory systems and not periodic inventory.
Answers:
- True: The inventory method is indeed an assumed cost flow that does not have to match the actual flow of goods. This conceptual distinction allows businesses to choose a method that best fits their financial reporting needs without being tied to how goods physically move in and out of inventory.
- False: While a grocery store may theoretically use LIFO, it is not common practice due to the perishable nature of their inventory; most will use first-in, first-out (FIFO) to mirror the actual flow of goods as older products are usually sold first.
- False: There is no recognized inventory method called 'first-in, last-out' under GAAP. The recognized methods include LIFO, FIFO, and average cost method.
- False: Inventory methods can be applied to both perpetual and periodic inventory systems. The choice between perpetual and periodic systems does not limit the use of a specific cost assumption method like FIFO or LIFO.