Studios Reported a Net Capital Loss of $30,000 in Year

question 93

Multiple Choice

Studios reported a net capital loss of $30,000 in Year 5. It reported net capital gains of $14,000 in Year 4 and $27,000 in Year 6. What is the amount and nature of the book-tax difference in Year 6 related to the net capital carryover?

• A)$11,000 unfavorable.
• B)$11,000 favorable.
• C)$16,000 unfavorable.
• D)$16,000 favorable.

---

Definitions:

Inventory Costs

Inventory costs include all expenses related to acquiring, holding, and managing inventory, including purchase costs, storage, and handling.

Cost Flow Assumptions

Assumptions made about how costs flow through inventory accounts that affect the cost of goods sold and ending inventory valuation.

LIFO

Last In, First Out, an inventory valuation method where the most recently produced or purchased items are the first to be expensed.