hich is true about the effect of a company using LIFO on Net Income and Income T
ID: 2434303 • Letter: H
Question
hich is true about the effect of a company using LIFO on Net Income and Income Tax Payable during times of generally rising prices?*Answer (check the box to indicate the correct response)
A. A company that uses LIFO will usually have the same Net Income and Income Tax Payable as it would if the company used FIFO.
B. A company that uses LIFO will have lower Net Income and lower Income Tax Payable than if the company used FIFO in the early years, but these effects will usually reverse in later years, when all of inventory is eventually sold.
C. A company that uses FIFO will have lower Net Income and lower Income Tax Payable than if the company used LIFO in the early years, but these effects will usually reverse in later years, when all of inventory is eventually sold.
D. The effect on Income Tax Payable and Net Income from using LIFO or FIFO is permanent and never reverses.
Explanation / Answer
Which is true about the effect of a company using LIFO on Net Income and Income Tax Payable during times of generally rising prices? *Answer (check the box to indicate the correct response) B. A company that uses LIFO will have lower Net Income and lower Income Tax Payable than if the company used FIFO in the early years, but these effects will usually reverse in later years, when all of inventory is eventually sold.
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