Reference no: EM132822077

Question 1: If costs are declining, will the LIFO or FIFO method of inventory valuation yield the lower cost of goods sold? Why?

Question 2: Can a company change its inventory method each accounting period? What accounting principle dictates this?

Question 3: What does the full-disclosure principle prescribe if a company changes from one acceptable accounting method to another?

Question 4: Explain the following statement: "Inventory errors correct themselves." If inventory errors are said to correct themselves, why are accounting users concerned when such errors are made?

Question 5: Does a company that uses the perpetual inventory system have to still do inventory physical counts at the end of the fiscal period? Why?

Question 6: What factors contribute to (or cause) inventory shrinkage?