If a Company Uses the LIFO Cost Flow Assumption on Its

question 96

Multiple Choice

If a company uses the LIFO cost flow assumption on its federal income tax return in order to minimize its tax payment, then it:

• A)must use LIFO on its financial statements.
• B)must use FIFO on its financial statements.
• C)may use any cost flow assumption permitted by GAAP on its financial statements.
• D)must correct the error at the beginning of the next accounting period.

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Definitions:

Chain Restaurants

Chain restaurants are a series of restaurants owned by the same company or individual, offering a standardized menu across different locations.

Competitive Advantage

The attributes or conditions that allow a company to produce a good or service at a lower price or in a more desirable fashion for customers than its competitors.

Communist Central Planners

Officials or authorities in a communist country responsible for determining the production, distribution, and allocation of goods and services.

Product Differentiation

The act of distinguishing a product or service from market rivals to heighten its allure for a particular target market.