Question

True or false: Regardless of the inventory costing method used, the financial statements will always report the same amount of inventory on the balance sheet and cost of goods sold on the income statement.

Answer 1

The answer is false

Step-by-step explanation:

We have different types of costing methods for valueing inventory - FIFO, LIFO, weighted average, specific identification method.

We have different amount under each method for inventory in financial statement.

For FIFO - First in First out. In this, the first inventory that was purchased first will be sold out first. So the ending inventory here reflects the current price and during the time of rising price, ending inventory is always higher than LIFO.

For LIFO - Last in Last out. In this, the last inventory that was purchased first will be sold out first. So the ending inventory here reflects the reflect the earliest price of inventories and during the time of rising price, ending inventory is always lower than LIFO.