A Disadvantage of the LIFO Method Is That

question 51

Multiple Choice

A disadvantage of the LIFO method is that:

• A) it doesn't match physical flow of goods.
• B) ending inventory is valued at very old costs.
• C) it matches current selling prices and current costs.
• D) Both A and B are correct.

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Definitions:

Creditor

An individual or institution that lends money or extends credit to another entity.

Interim Statements

Financial statements prepared for a period shorter than a financial year, typically quarterly or semi-annually, to provide a more immediate financial status of the company.

Insurance

A financial product that provides protection against financial losses from specified risks, such as accidents, theft, or natural disasters.

Fiscal Year

A one-year period that companies and governments use for accounting purposes and preparing financial statements, which may or may not align with the calendar year.