Which of the Following Statements Is True

question 133

Multiple Choice

Which of the following statements is true?

• A) Application of LIFO for financial reporting purposes must follow the tax laws applicable to LIFO.
• B) A company must use FIFO for both tax reporting and financial statement reporting.
• C) A company may use FIFO to valuate inventory and LIFO for financial statement reporting purposes.
• D) LIFO must be used for financial reporting if it is used for tax purposes.

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Definitions:

Operating Activities

The primary revenue-producing activities of a business and other activities that are not investing or financing, which are reflected in the cash flows from operating activities section of the cash flow statement.

Merchandise Inventories

The total value of a company’s products currently available for sale, held by the business as assets.

Financing Activities

Activities that result in changes in the size and composition of the equity capital or borrowings of a company, as reported in the cash flow statement.

Treasury Stock

Treasury stock consists of shares that were issued and later reacquired by the issuing company, reducing the amount of outstanding stock on the open market.