Which inventory method is better described as having a balance-sheet focus and why is it considered as such?

A) FIFO; better approximates the value of ending inventory.

B) LIFO; better approximates the value of ending inventory.

C) LIFO; better approximates inventory cost necessary to generate revenue.

D) FIFO; better approximates inventory cost necessary to generate revenue.

Answer: FIFO; better approximates the value of ending inventory.

What is the ending inventory balance for Julia & Company assuming that it uses FIFO?

A) $125.

B) $100.

C) $110.

D) $85.

Answer: $85.

LIFO is considered an income-statement approach for reporting inventory because it:

A) Always results in a higher amount of net income being reported.

B) Better approximates the value of ending inventory.

C) Better approximates inventory cost necessary to generate revenue.

D) Always results in a lower amount of net income being reported.

Answer: Better approximates inventory cost necessary to generate revenue.