Brown Corporation Uses the FIFO Method for Internal Reporting Purposes

question 21

Multiple Choice

Brown Corporation uses the FIFO method for internal reporting purposes and LIFO for external reporting purposes.The balance in the LIFO Reserve account at the end of 2007 was $60,000.The balance in the same account at the end of 2008 is $90,000.Brown's Cost of Goods Sold account has a balance of $450,000 from sales transactions recorded during the year.What amount should Brown report as Cost of Goods Sold in the 2008 income statement?

• A)$420,000.
• B)$450,000.
• C)$480,000.
• D)$540,000.

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Definitions:

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs, representing the financial gain in excess of the opportunity costs of resources used.

X-Inefficiency

The difference between efficient behavior of enterprises assumed or implied by economic theory and their observed behavior in practice, often due to a lack of competitive pressure.

Pure Competition

A market structure characterized by many small firms producing identical products, where no single firm has significant control over the market price.

Monopolistic Competition

A market structure characterized by many producers selling products that are similar but not identical, allowing for competition based on quality, price, and brand.