Breguet Company Uses the FIFO Inventory Method

question 174

Multiple Choice

Breguet Company uses the FIFO inventory method. The company reported inventory of CHF2,270,000 on its December 31, 2014 statement of financial position. Had average-cost been used, the company would have reported inventory of CHF1,860,000. The company's tax rate is 30%. What is the impact of the inventory cost flow assumption on Breguet's 2014 financial statements?

• A) Income before taxes reported by Breguet would be CHF410,000 lower as a result of using the FIFO cost flow assumption.
• B) Breguet would pay CHF123,000 less in taxes for 2014 as a result of using the FIFO cost flow assumption.
• C) Income after taxes reported by Breguet would be CHF287,000 higher as a result of using the FIFO cost flow assumption.
• D) The only financial statement affected by the cost flow assumption is the statement of financial position, which would report CHF410,000 more in inventory as a result of using the FIFO cost flow assumption.

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Definitions:

Minimum Number

The smallest quantity or amount permitted or required under certain conditions or for a specific process.

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A legal doctrine that prevents a party from denying the corporation's existence for the purposes of a transaction if they have acted as if the corporation existed.

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