Which of the Following Statements Is True

question 133

Multiple Choice

Which of the following statements is true?

• A) Application of LIFO for financial reporting purposes must follow the tax laws applicable to LIFO.
• B) A company must use FIFO for both tax reporting and financial statement reporting.
• C) A company may use FIFO to valuate inventory and LIFO for financial statement reporting purposes.
• D) LIFO must be used for financial reporting if it is used for tax purposes.

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Definitions:

Discretionary Fixed Costs

Those fixed costs that arise from annual decisions by management to spend on certain fixed cost items, such as advertising and research.

Committed Fixed Costs

Long-term fixed costs that cannot be easily altered in the short term, such as lease payments or insurance contracts.

Volume

The quantity or amount of something, often used in context with production, sales, or trading activities.

Mixed Cost

Expenses that have both variable and fixed components, varying with the level of production or sales to some degree.