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:

Withhold Information

The act of deliberately refraining from disclosing certain details or facts that may be necessary or requested.

Agent

An individual or entity authorized to act on behalf of another person or entity in legal or business matters.

Limited Partner

An investor in a partnership who has limited liability to the extent of their investment and does not participate in day-to-day management.

Import/Export

Import/export involves the buying and selling of goods or services between countries, subject to regulatory requirements and tariffs.