Apply the retail inventory method to estimate ending inventory for XYZ Co., assuming the following information.

Assuming purchase costs are rising, determine which oft.he statements below are correct regarding
the cost of goods sold under FIFO, LIFO and weighted average cost flow methods. (Check all that
apply.)

Companies using FIFO will report the highest gross profit and net income.
Companies using FIFO will report the smallest cost of goods sold.
Companies using FIFO will pay higher taxes than companies using LIFO, assuming all else
being equal.
Companies using LIFO will report the smallest cost of goods sold.
Weighted average cost of goods sold will be between FIFO and LIFO costs of goods sold.



Identify the statement below that best describes what the full-disclosure principle prescribes if a

company changes from one acceptable accounting method to another.

The principle prescribes that the company must continue to use the same inventory
costing method as it did in previous accounting periods.
The principle prescribes that the notes to the financial statements describe the change,
its justification, and its effect on income.
The principle requires that all inventory be reported at the market value (cost) of
replacing inventory when market value is lower than cost.


Apply the retail inventory method to estimate ending inventory for XYZ Co., assuming the following
information.
Goods available at retail selling prices.
Goods sold at retail prices
Cost of goods sold is
Cost of ending Inventory
$100,000
$60,000
70% of retail
7

$28,000
$40,000
$42,000