When LIFO Is Used and Inventory Quantities Fall Below the Level

question 20

Multiple Choice

When LIFO is used and inventory quantities fall below the level of the previous period, the situation is called a:

• A)LIFO adjustment.
• B)LIFO failure.
• C)LIFO liquidation.
• D)LIFO materiality.

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Definitions:

Cost Method

An accounting method used to value holdings in another company at the cost of acquisition plus any additional costs incurred.

Carrying Amount

The value at which an asset is recognized on the balance sheet after deducting any accumulated depreciation and impairment losses.

Associate

In a business context, this usually refers to a person or entity that is connected with another as a partner, colleague, or member of an enterprise.

Subsidiary

A company that is completely or partially owned and controlled by another company, known as the parent company.