Summer,Inc

question 37

Multiple Choice

Summer,Inc.has been in business for 20 years.During that time,the company has consistently used the LIFO inventory costing method.Because of inflation,prices for merchandise have increased consistently over the 20 years.The company has maintained the same inventory quantities over the 20-year period.Which of the following statements is true?

• A)Summer's total net income for the past 20 years is greater than it would have reported using another inventory method.
• B)Summer will have paid more income taxes over the past 20 years than it would have if it had used the FIFO method.
• C)Summer will have to continue using the LIFO method indefinitely because of generally accepted accounting principles and federal income tax rules.
• D)The ending inventory figure reported on the balance sheet may be significantly lower than its current value.

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Definitions:

Current Account

A component of a country's balance of payments that measures the trade of goods and services, net income, and direct transfers with the rest of the world.

Financial Account

A component of the balance of payments that records investment flows and holdings of foreign assets by domestic residents and domestic assets by foreigners.

Official Reserves

Foreign currencies owned by the central bank of a nation.

Balance Of Payments

A document detailing every financial transaction between a country's inhabitants and international entities within a specific timeframe.