Which of the Following Is True Regarding Cost Flow Assumptions

question 8

Multiple Choice

Which of the following is true regarding cost flow assumptions?

• A)Manufacturing firms are required to use FIFO.
• B)Service firms are required to use LIFO.
• C)If a firm uses FIFO for tax purposes, then FIFO must be used for financial reporting purposes.
• D)If a firm uses LIFO for tax purposes, then LIFO must be used for financial reporting purposes.

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Definitions:

Negotiable Promissory Note

A financial document that contains a written promise to pay a specified sum of money to a named person or bearer under certain terms.

Worthless Securities

Financial instruments that have lost all monetary value, often resulting in a total loss for the holder.

Holder in Due Course

A legal term for a person who has acquired a negotiable instrument in good faith and for value, and thus has certain rights to it free from many defenses.

Restrictive Indorsement

A signature on a negotiable instrument, such as a check, that limits how the instrument can be used.