Which of the Following Statements Is/are True

question 122

Multiple Choice

Which of the following statements is/are true?

• A) In a period of rising costs and stable inventory levels, using the LIFO method leads to a lower taxable income and higher net income compared to the FIFO method.
• B) In a period of rising costs and stable inventory levels, using the FIFO method leads to a higher taxable income and higher net income compared to the LIFO method.
• C) In a period of falling costs and stable inventory levels, cost of goods sold is the same under LIFO and FIFO.
• D) All of the other answer choices are true.

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Definitions:

Discount Rate

The interest rate used to discount future cash flows to their present value, often used in investment appraisal.

Quick Ratio

A liquidity ratio that measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventories.

Debt-Paying Ability

A measurement or assessment of a company's capacity to meet its debt obligations with its assets or income.

Interest Calculations

Interest Calculations involve determining the amount of interest due on loans, investments, or savings, based on the principal amount, rate of interest, and time period.