Fte Following Statements About Inventories for Tax Purposes Are All

question 49

Multiple Choice

fte following statements about inventories for tax purposes are all true, except:

• A) Inventories may not be valued on the basis of the "base stock" method, the prime cost method, nor the variable cost method.
• B) If inventories are required to be kept, the taxpayer must be on the accrual basis for purchases and sales of inventory, but it may be on the cash method for the service portion of the business.
• C) fte use of the LIFO method invariably results in an annual reduction in taxable income.
• D) A strict adherence to GAAP is no guarantee that the IRS will allow a write-down of inventories.

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Definitions:

Red-tinted Glasses

Glasses with lenses that are tinted red, which can influence perception and mood, sometimes used experimentally to study the effects of colored light on human behavior.

Green Apple

A variety of apple that is generally green in color, often with a tart flavor, used both in cooking and consumed raw.

Trichromatic Theory

A theory of color vision that explains how humans perceive color through the response patterns of three types of cones in the retina, sensitive to short, medium, and long wavelengths of light.

Three Types Of Cones

Refer to the photoreceptor cells in the retina of the eye responsible for color vision; they are sensitive to different wavelengths of light (long, medium, and short) corresponding to the colors red, green, and blue.