When Using Dollar-Value LIFO, If the Incremental Layer Was Added

question 114

Multiple Choice

When using dollar-value LIFO, if the incremental layer was added last year, it should be multiplied by

• A) last year's cost ratio and this year's index.
• B) this year's cost ratio and this year's index.
• C) last year's cost ratio and last year's index.
• D) this year's cost ratio and last year's index.

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Definitions:

Functional Currency

The currency of the primary economic environment in which an entity operates, usually determined by the currency that mainly influences sales prices for goods and services or the country whose competitive forces and regulations most affect the entity's performance.

Cost of Sales

The direct costs attributable to the production of the goods sold by a company.

Economic Exposure

The risk that a company's cash flow, earnings, or future cash flows will be affected by changes in exchange rates.

Monetary Items

Assets and liabilities that are to be received or paid in a fixed or determinable amount of money.