Which of the Following Is Not Considered an Advantage of LIFO

question 144

Multiple Choice

Which of the following is not considered an advantage of LIFO when prices are rising?

• A) The inventory will be overstated.
• B) The more recent costs are matched against current revenues.
• C) There will be a deferral of income tax.
• D) A company's future reported earnings will not be affected substantially by future price declines.

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Definitions:

Incidence

In economics, the allocation or distribution of a tax's economic burden between buyers and sellers.

Tax Rate Structure

The percentage of a tax base that must be paid in taxes—25 percent of income, for example.

Tax Base

The tax base is the total amount of income, property, assets, or other wealth that is subject to taxation by a taxing authority.

Marginal Tax Rate

The rate at which the next dollar of taxable income is taxed, indicating the impact of each additional dollar of income on taxes owed.