Which of the following is true regarding the use of LIFO for inventory valuation

Question

Which of the following is true regarding the use of LIFO for inventory valuation? a. If LIFO is used for external financial reporting, then it must also be used for internal 9. reports. b. For purposes of external financial reporting, LIFO may not be used with the lower of cost or market approach c. If LIFO is used for external financial reporting, then it cannot be used for tax purposes. d. When prices are falling, the use of LIFO can help companies minimize taxes e. IFRS does not allow the use of LIFO. 10. When a company uses a Purchase Discounts Lost account, the recorded cost of a purchased inventory item is its a. invoice price b. invoice price plus the amount of the purchase discount lost. c. invoice price less the amount of the purchase discount actually taken. d. invoice price less the purchase discount allowable whether taken or not. White Corporation uses the FIFO method for internal reporting purposes and LIFO for external reporting purposes. The balance in the LIFO Reserve account at the end of 2014 was $160,000. The balance in the same account at the end of 2015 should be $240,000. The required journal entry will include a, debit Allowance to Reduce Inventory to LIFO 80,000 b. credit Allowance to Reduce Inventory to LIFO $240,000 c, debit Cost of Goods Sold 80,000 d. debit Gross Profit $80,000 e. debit Inventory $80,000 11. Feine Co. accepted delivery of merchandise which it purchased on account. As of December 31, 12. Feine had recorded the purchase, but did not include the merchandise in its physical count of inventory. The effect of this on its financial statements for December 31 would be a. net income, current assets, and retained earnings were understate b. net income was correct and current assets were understated. c. net income was understated and current liabilities were overstated. d. net income was overstated and current assets were understated. e. net income was correct, current assets were understated, retained earnings was correct d.

Explanation / Answer

9. If LIFO is used for External financial reporting, then it must also be used for internal reports.

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