HH Company Uses LIFO

question 74

Multiple Choice

HH Company uses LIFO.HH disclosed that if FIFO had been used,inventory at the end of 2016 would have been $20 million lower than the difference between LIFO and FIFO at the end of 2015.Assuming HH has a 30% income tax rate:

• A)Its reported cost of goods for 2016 would have been $14 million less if it had used FIFO rather than LIFO for its financial statements.
• B)Its reported cost of goods for 2016 would have been $20 million less if it had used FIFO rather than LIFO for its financial statements.
• C)Its reported cost of goods sold for 2016 would have been $14 million higher if it had used FIFO rather than LIFO for its financial statements.
• D)Its reported cost of goods sold for 2016 would have been $20 million higher if it had used FIFO rather than LIFO for its financial statements.

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Definitions:

Public Good

A good that is non-excludable and non-rivalrous, meaning it can be used by everyone and one person's use does not reduce its availability to others.

Private Good

A product or service that is consumable and excludable, meaning its use can be restricted to paying customers.

Pareto Optimal

A situation in the economy where optimizing the allocation of resources means that improving one person's situation leads to a decline in another's.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning that individuals cannot be effectively excluded from use, and use by one individual does not reduce availability to others.