In 2012,George Used the FIFO Lower of Cost or Market

question 21

Multiple Choice

In 2012,George used the FIFO lower of cost or market inventory method.As of December 31,2011,the inventory cost was $50,000 and its market price was $40,000.At the time of filing his 2012 income tax return,George changed to the LIFO method.The ending inventory at cost on December 31,2012,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 2012 is $50,000, and George must spread a $10,000 adjustment ($50,000 - $40,000) evenly over 2012, 2013, and 2014.
• B) The beginning inventory for 2012 is $40,000.
• C) The beginning inventory for 2012 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.

---

Definitions:

Tobacco Cultivation

The agricultural process of growing and harvesting tobacco plants, typically for use in the production of cigarettes and other tobacco products.

Kidnapping of Pocahontas

The abduction of Pocahontas, a Native American woman notable for her association with the colonial settlement at Jamestown, Virginia, by colonists in 1613, an event with significant cultural and historical implications.

Mayflower Compact

The Mayflower Compact was a foundational document for the governance of the Plymouth Colony, signed in 1620 by the Pilgrims aboard the Mayflower. It is often cited as a pioneering example of democratic governance and a social contract in the American colonies.