If the LIFO Reserve Increases During the Year, and Inventory

question 31

Multiple Choice

If the LIFO reserve increases during the year, and inventory costs are increasing, ________.

• A) cost of goods sold will be higher under FIFO than LIFO
• B) cost of goods sold will be higher under LIFO than FIFO
• C) the journal entry will debit LIFO Reserve
• D) the journal entry will credit Cost of Goods Sold

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Definitions:

Consumption

The action of using up goods and services to satisfy needs or desires.

Income

The financial gain received by an individual or entity, usually through employment, investments, or business operations.

Interest Rate

The percentage of principal charged by the lender for the use of its money.

Budget Constraint

An economic model that outlines the combination of goods and services a consumer can purchase given their income and the prices of those goods and services.