Accounting Procedures Allow a Business to Evaluate Their Inventory at LIFO

question 88

Multiple Choice

Accounting procedures allow a business to evaluate their inventory at LIFO (Last In First Out) or
FIFO (First In First Out) . A manufacturer evaluated its finished goods inventory (in $1000) for five
Products both ways. Based on the following results, is LIFO more effective in keeping the value of
His inventory lower?
What is the decision at the 5% level of significance?

• A) Looking at the large P-value of .2019 we conclude LIFO is more effective.
• B) Reject the null hypothesis and conclude LIFO is more effective.
• C) Reject the alternate hypothesis and conclude LIFO is more effective.
• D) The large P-value of .2017 indicates that there is a good chance of getting this sample data when the two methods are in fact not significantly different, so we conclude that LIFO is

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Definitions:

AMT Exemption

An amount exempt from the Alternative Minimum Tax, designed to ensure that taxpayers with higher income pay a minimum amount of tax.

Corporation

A legal entity owned by shareholders, with rights and liabilities distinct from those of its owners, and subject to corporate income tax.

AMT Income

Alternative Minimum Tax income calculates income with different rules than regular taxes, aiming to ensure taxpayers with high income pay a fair share of taxes.

Dividend Income

consists of payments received by shareholders from stocks or mutual funds, representing a share of the profits of the corporation or fund.