One of the Principal Reasons for Selecting the LIFO Cost

question 29

Multiple Choice

One of the principal reasons for selecting the LIFO cost flow assumption instead of the FIFO cost flow assumption in an inflationary economic environment is that:

• A)net income will be higher.
• B)income taxes will be lower.
• C)balance sheet inventory values will be higher.
• D)a higher selling price can be established.

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Definitions:

Lease Payments

Payments made under a lease agreement by the lessee to the lessor for the use of an asset over the lease term.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, often used in evaluating investment opportunities.

Interest Rate

The ratio of interest charged on a loan to the borrower, usually represented as a yearly percentage of the remaining loan amount.

Compound Interest

Calculating interest that includes both the original principal amount and all previously accumulated interest on a loan or deposit.