Use of the LIFO Method Has Been Deemed Unacceptable Under

question 33

Multiple Choice

Use of the LIFO method has been deemed unacceptable under AASB 102 because?

• A) It presents too many options to report preparers and may confuse them.
• B) This method allows profits to be manipulated by purchasing items at year's end even though they have not been sold.
• C) It can result in higher cost of goods sold figures and therefore lower taxes.
• D) This method did reflect the actual physical flow of inventories.
• E) All of the given answers.

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Definitions:

Competitive Market

A market structure characterized by a large number of buyers and sellers, so no single participant has significant market power.

Profit Maximization

The operation by which businesses deduce the pricing and quantity of output that maximizes profit gains.

Ore

Naturally occurring minerals or rock from which valuable metals or other elements can be extracted profitably.

Marginal Rate of Substitution

The rate at which a consumer is willing to trade one good for another while maintaining the same level of utility.