In 2016 George Used the FIFO Lower of Cost or Market

question 22

Multiple Choice

In 2016 George used the FIFO lower of cost or market inventory method.As of December 31,2016,the inventory cost was $50,000 and its market price was $40,000.At the time of filing his 2017 income tax return,George changed to the LIFO method.The ending inventory at cost on December 31,2017,was $75,000 and the market price of the goods totaled $35,000.Which of the following statements is correct?

• A)The beginning inventory for 2017 is $50,000,and George must spread a $10,000 adjustment ($50,000 - $40,000)evenly over 2017,2018,and 2019.
• B)The beginning inventory for 2017 is $40,000.
• C)The beginning inventory for 2017 is $50,000,and George must spread a $10,000 adjustment over the three previous years.
• D)The change is invalid since the taxpayer did not apply for the change by the end of the tax year of change.
• E)None of the above.

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Definitions:

Intoxicated

The condition of being under the influence of alcohol or drugs to the extent of losing control over physical and/or mental faculties.

Avoid The Contract

To nullify or terminate a contractual agreement due to errors, fraud, or illegality.

Repudiating

A term often used in legal and financial contexts to refer to the rejection or denial of a claim, duty, or responsibility.

Capacity

In legal terms, it refers to the ability of an individual or entity to enter into a contract, including understanding its terms and being of legal age and sound mind.