Which of the Following Statements Is True

question 67

Multiple Choice

Which of the following statements is true?

• A) Unexpected inflation benefits lenders and hurts borrowers.
• B) Unexpected deflation benefits lenders and hurts borrowers.
• C) Unexpected inflation benefits borrowers but does not affect lenders.
• D) Unexpected deflation benefits lenders but does not affect borrowers.

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Definitions:

LIFO Inventory Costing

An inventory valuation method that assumes the items of inventory most recently purchased or produced are sold first, with costs of the oldest inventory remaining in stock.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of materials and labor.

Annual Accounting Period

An annual accounting period is a 12-month period over which a company reports its financial performance and prepares financial statements.

LIFO Reserve

The difference between the cost of inventory calculated using the Last-In, First-Out (LIFO) method and the cost using the First-In, First-Out (FIFO) method.