Duck Company Has Valued Its Inventories at FIFO Cost for the Past

question 42

Multiple Choice

Duck Company has valued its inventories at FIFO cost for the past 10 years. The company would like to change to the LIFO method, effective in 2018.

• A)The election to change can be made with the 2018 tax return and the beginning inventory for 2018 will be the same as the FIFO inventory at the end of 2017 and no § 481 adjustment is required.
• B)The beginning inventory value for 2018 must be computed as though the company had been using LIFO in all prior years and a § 481 adjustment is required.
• C)The taxpayer must apply in 2017 for permission to change methods effective in 2018.
• D)Duck must amend all prior years' tax returns to compute income by the LIFO method.
• E)None of the above.

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Definitions:

Net Profit

The financial gain or loss a business makes after subtracting all expenses, taxes, and costs from total revenue.

Shadow Price

In linear programming, it refers to the value that represents the change in the optimal objective function value per unit increase in the right-hand side of a constraint.

Finishing Constraint

A limitation or requirement in the production process that must be met before a product can be completed and delivered.

Total Profit

Total profit is the total income of a business after subtracting all expenses.