The LIFO Conformity Rule Requires a Company That Uses

question 82

Multiple Choice

The LIFO conformity rule requires a company that uses:

• A)the LIFO assumption for computing cost of goods sold on its tax return to also use the LIFO assumption in preparing its financial statements.
• B)any inventory cost assumption to use the LIFO cost assumption for tax purposes.
• C)the LIFO assumption for computing cost of goods sold on its financial statements to also use LIFO on its tax return.
• D)the LIFO assumption to avoid paying taxes on inventory profits.

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Definitions:

Premium on Bonds Payable

A situation where bonds are sold above their face value, leading to a credit balance in the premium on bonds payable account.

Journal Entry

A record in accounting that documents a business transaction, indicating the accounts and amounts debited and credited.

Contract Rate

The agreed-upon interest rate in a lending agreement, bond, or other financial contracts.

Market Rate

The prevailing interest rate available in the market for securities of a similar risk and maturity, or the standard rate charged or paid for a specific service or commodity.