1. In an inflationary period, which inventory cost flow method will produce the largest amount of total assets on the balance sheet? Explain.

2. What is the difference between the flow of costs and the physical flow of goods?

3. Does the choice of cost flow method (FIFO, LIFO, or weighted average) affect the statement of cash flows? Explain.

4. Assume that Key Co. purchased 1,000 units of merchandise in its first year of operations for $25 per unit. The company sold 850 units for $40. What is the amount of cost of goods sold using FIFO? LIFO? Weighted average?