Some Companies That Use a Perpetual Inventory System and the LIFO

question 155

Multiple Choice

Some companies that use a perpetual inventory system and the LIFO flow assumption restate their inventories at year-end to the amount indicated by periodic LIFO costing procedures. The primary reason for this adjustment is that:

• A) Periodic LIFO often results in a higher valuation of inventory, thus reducing taxable income.
• B) This adjustment is necessary to record shrinkage losses.
• C) Periodic LIFO often results in a lower valuation of inventory, thus reducing taxable income.
• D) Periodic and perpetual costing procedures produce the same results if the year-end inventory has been counted properly. No adjustment would be needed.

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Definitions:

Market

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Merit Raise

A salary increase awarded to employees based on their job performance.

High Performers

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