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.

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Definitions:

Deciduous Forest

A type of forest characterized by trees that lose their leaves seasonally, usually in response to cold or dry weather.

Temperate Grassland

A biome characterized by vast open spaces with relatively few trees, dominated by grasses, and experiencing moderate rainfall, making it ideal for agriculture.

Grasshoppers

Insects belonging to the suborder Caelifera within the order Orthoptera, known for their powerful hind legs for jumping and sometimes their roles as agricultural pests.

Meadowlarks

A group of North American grassland birds, known for their distinctive calls and beautiful songs.