GG Inc Uses LIFO

question 13

Multiple Choice

GG Inc. uses LIFO. GG disclosed that if FIFO had been used, inventory at the end of 2009 would have been $15 million higher than the difference between LIFO and FIFO at the end of 2008. Assuming GG has a 40% income tax rate:

• A)Its reported cost of goods sold for 2009 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements.
• B)Its reported cost of goods sold for 2009 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.
• C)Its reported net income for 2009 would have been $9 million higher if it had used FIFO rather than LIFO for its financial statements.
• D)Its reported net income for 2009 would have been $15 million higher if it had used FIFO rather than LIFO for its financial statements.This is (1 tax rate) the pre-tax effect of $15 million.

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Definitions:

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