1. Beginning inventory —increase 2. Purchases —increase 3. Ending inventory —decrease 4. Purchase returns —decrease 5. Freight-in —increase Four methods of assigning cost to ending inventory and cost of goods sold are (1) specificidentification, (2) first-in, first-out (FIFO), (3) last-in, first-out (LIFO), and (4) average cost. The specific identification method requires each unit sold during the period or each unit on hand at the end of the period to be traced through the system and matched with its actual cost. First-in, first-out (FIFO) assumes that units sold are the first units acquired. The last-in, first-out (LIFO) method assumes that the units sold are the most recent units purchased. The average cost method assumes that cost of goods sold and ending inventory consist of a mixture of all the goods available for sale. The average unit cost applied to goods sold or ending inventory is an average unit cost weighted by the number of units acquired at the various unit prices. When costs are declining, LIFO will result in a lowercost of goods sold and higherincomethan FIFO. This is because LIFO will include in cost of goods sold the most recently purchased lower cost merchandise. LIFO also will provide a higherending inventory in the balance sheet.