Which One of the Following Statements Is True

question 14

Multiple Choice

Which one of the following statements is true?

• A)Income manipulation is difficult under LIFO.
• B)Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.
• C)Companies may use LIFO for tax purposes and FIFO in the financial statements.
• D)In periods of declining prices, LIFO will result in the payment of lower income taxes.

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Definitions:

Raw Materials

Materials in their natural, unprocessed state used as inputs in production processes.

FOB Destination

A shipping term where the seller bears the shipping costs and retains ownership of the goods until they are delivered and accepted by the purchaser.

Consignment Stock

Inventory that is in the possession of the customer but still legally owned by the supplier until sold.

Stock Discrepancies

Differences between the amount of inventory recorded and the actual inventory present, often resulting from errors or theft.