Which One of the Following Statements Is True

question 14

Multiple Choice

Which one of the following statements is true?

• A)Income manipulation is difficult under LIFO.
• B)Accounting principles do not require that the inventory cost flow approximate the physical flow of goods.
• C)Companies may use LIFO for tax purposes and FIFO in the financial statements.
• D)In periods of declining prices, LIFO will result in the payment of lower income taxes.

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Definitions:

Fixed Expenses

Costs that do not fluctuate with changes in production volume or sales, such as rent, insurance, and salaries.

Variable Costing

An accounting method that includes only variable production costs (direct materials, direct labor, and variable manufacturing overhead) in product cost calculations, excluding fixed manufacturing overhead.

Absorption Costing

A method of costing that includes all manufacturing costs - direct materials, labor, and both variable and fixed overhead - in the cost of a product.

Income Statement

A financial statement that shows a company's revenues and expenses over a specific period, ending with net profit or loss.