The type of income statement that reports a series of subtotal such as gross pro
ID: 2490319 • Letter: T
Question
The type of income statement that reports a series of subtotal such as gross profit, operating income, and income before taxes is a __income statement. A. Single step. B. Subtotaled. C. Multiple step. D. Classified
The primary reason for the popularity of LIFO is that it gives. A. A better matching of physical flow and coat flow. B. A lower income tax obligation when inventory costs are rising. C. Simplified record keeping. D. A simpler method to apply.
The disclosure that shows the different in the cost of inventory between LIFO and FIFO is referred to as the. A. FIFO adjustment. B. Inventory allowance. C. LIFO reserve. D. Net realizable value
Explanation / Answer
The type of income statement that reports a series of subtotal such as gross profit, operating income, and income before taxes is a multiple step income statement.
As, in a Income Statement in which sub total of Gross Profit, operating income, EBIT, EBT is shown step by step and not a combined amount is deducted from ales to calculate EBT.
The primary reason for the popularity of LIFO is that it gives a lower income tax obligation when inventory costs are rising. Assuming that costs normally rise over time, using the most recent (last in) inventory reports a higher Cost of Good Sold than FIFO , which lowers reported profit and which lowers current taxes.
The LIFO reserve is a contra inventory account that will reflect the difference between the FIFO cost and LIFO cost of its inventory.
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