Which of the Following Statements Is Not Valid as It

question 55

Multiple Choice

Which of the following statements is not valid as it applies to inventory costing methods?

• A) If inventory quantities are to be maintained, part of the earnings must be invested (plowed back) in inventories when FIFO is used during a period of rising prices.
• B) LIFO tends to smooth out the net income pattern by matching current cost of goods sold with current revenue, when inventories remain at constant quantities.
• C) When a firm using the LIFO method fails to maintain its usual inventory position (reduces stock on hand below customary levels), there may be a matching of old costs with current revenue.
• D) The use of FIFO permits some control by management over the amount of net income for a period through controlled purchases, which is not true with LIFO.