A Change in Inventory Reporting from LIFO to FIFO Is

question 31

Multiple Choice

A change in inventory reporting from LIFO to FIFO is:

• A)An extraordinary item.
• B)A discontinued item.
• C)Not allowed once lower of cost or market is applied.
• D)Allowed,if it improves the usefulness of information in the financial statements.
• E)Not reported,as it is considered a change in accounting estimate.

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Definitions:

Analyzing

The process of examining data, documents, or operations to understand patterns, identify trends, and derive meaningful insights.

Ratios

Financial metrics used to make comparisons between different aspects of a company's performance or financial position, to assess its health, efficiency, and profitability.

Basic Earning Power Ratio

A financial metric that indicates how well a company's assets are generating income before the effects of taxes and financing costs.

Financial Leverage

The extent to which fixed-income securities (debt and preferred stock) are used in a firm’s capital structure. If a high percentage of a firm’s capital structure is in the form of debt and preferred stock, then the firm is said to have a high degree of financial leverage.